The Rupiah Has the Potential to Sluggish Again Due to Signals of the Fed's Interest Rate Cut

Rupiah (Photo: Antara)

JAKARTA - The rupiah exchange rate in trading on Wednesday 17 January 2024 is expected to fluctuate again but will close lower against the United States (US) dollar driven by further signals regarding the Fed and the US economy.

Quoting Bloomberg, on the Rupiah exchange rate on Tuesday, January 16, the spot rupiah exchange rate weakened 0.24 percent to IDR 15,593 per US dollar. Meanwhile, the Jisdor rupiah exchange rate closed up 0.24 percent to a price level of IDR 15,592 per US dollar.

Director of PT. Profit Forexindo Berjangka Ibrahim Assuaibi said that market players are now waiting for further signals regarding the Fed and the US economy. Meanwhile, US retail sales and industrial production data are expected to provide more clues about the world's largest economy.

"Readings of US industrial production and retail sales data will be released on Wednesday and are expected to provide more signals for the economy," he said in a statement quoted on Tuesday, January 16.

Ibrahim said any signs of economic resilience give the Fed more room to keep interest rates higher for longer.

But markets appeared to ease speculation slightly that the Fed would start lowering interest rates as early as March 2024, according to the CME Fedwatch tool.

Focus now turns to fourth-quarter gross domestic product (GDP) data, due on Wednesday, for more cues on the economy. GDP is expected to slightly exceed the government's annual target of 5 percent in 2023.

"This is largely due to the lower comparison base compared to 2022," he explained.

From an internal perspective, Bank Indonesia recorded the position of foreign debt, aka RI's external debt, as of November 2023 at 400.9 billion US dollars or IDR 6,230 trillion (assuming an exchange rate of IDR 15,540 per US dollar).

BI claims that the foreign debt position remains under control. The position of foreign debt as of November 2023 was recorded to have increased by 2 percent compared to the same period the previous year yoy. The development of external debt was mainly due to public sector external debt transactions.

Apart from that, the foreign debt position in November 2023 is also influenced by the weakening of the US dollar against the majority of global currencies, including the Rupiah. This has an impact on increasing statistical figures for Indonesian external debt in other currencies in US dollars.

"Indonesia's maintained foreign debt in November 2023 can be seen from the ratio of external debt to Gross Domestic Product (GDP) of 29.3 percent. Apart from that, it can be seen from the dominance of long-term foreign debt with a share reaching 87.1 percent of the total external debt," he said.

BI and the government will strengthen coordination and monitor developments to keep the foreign debt structure healthy.

Apart from that, the role of external debt will also continue to be optimized to support development financing and encourage sustainable national economic growth, by minimizing risks that could affect economic stability.

Ibrahim estimates that the rupiah will fluctuate but close lower in trading Wednesday, January 17 in the price range of IDR 15,570- IDR 15,640 per US dollar.