The Rupiah Has the Potential to Weaken, This is the Affecting Sentiment

Rupiah (photo: dock. Antara)

JAKARTA - The rupiah exchange rate in trading on Thursday, January 11, 2024 is expected to fluctuate again but will close lower against the United States (US) dollar driven by external and internal data.

Quoting Bloomberg, on the Rupiah exchange rate on Wednesday 10 January, the spot rupiah exchange rate weakened 0.32 percent to IDR 15,570 per US dollar. Meanwhile, the Jisdor rupiah exchange rate closed down 0.32 percent to a price level of IDR 15,568 per US dollar.

Director of PT.Laba Forexindo Berjangka Ibrahim Assuaibi said that the main focus remains on the US CPI data released on Thursday which is expected to show inflation increasing slightly in December.

"Stagnant inflation, coupled with recent signs of labor market resilience, provides room for the Fed to keep interest rates higher for a longer period of time," he said, quoted Thursday, January 11.

Traders are seen continuing to reduce bets that the Fed will start cutting interest rates as soon as March 2024. The CME Fedwatch tool shows bets on a 25 basis point rate cut in March at a 63.6 percent chance, down from a 69.6 percent chance which is visible within a week. ago.

From an internal perspective, the market responded negatively to the World Bank's release, in its Global Economic Prospects January 2024 estimating that the global economy will slow to 2.4 percent this year compared to 2.6 percent in 2023.

Meanwhile, the world economy is estimated to only grow by 2.7 percent in 2025, this projection is lower than last June's 3.0 percent.

Growth of 2.6 percent in 2023 would also be the lowest in 50 years, outside of the global recession during the pandemic. The World Bank also said this was the first time they predicted that economic growth would continue to decline for three consecutive years.

Then, Ibrahim said that the World Bank also warned that there were big risks to future growth from conflict in the Middle East, disruption in commodity markets, high borrowing costs, swelling debt, the sloping Chinese economy, still high inflation, and extreme climate change.

"Meanwhile for Indonesia, the World Bank maintained its growth projection for this year at 4.9 percent. However, they cut the 2025 projection to 4.9 percent, from 5.0 percent in last June's projection. The world bank's projection is not in line with the government's projection by 5.2 percent," he explained.

One of the impacts of the difficulty of economic growth in 2024 at 5.2 percent is that Indonesia will no longer receive the blessing of soaring commodity prices for this year and next year, which will affect imports and exports as well as the decline in China's economy, one of its biggest business partners.

Ibrahim estimates that the rupiah will fluctuate but close lower in trading on Thursday, January 11 in the price range of IDR 15,550- IDR 15,600 per US dollar.