The Rupiah Is Predicted To Continue The Weakening Trend Against The US Dollar

Rupiah (Photo: Antara)

JAKARTA - The rupiah exchange rate in trading Monday, January 29, 2024 is expected to move fluctuating again but closed lower against the United States (US) dollar because the market estimates the Fed will continue to maintain interest rates.

Quoting Bloomberg, the Rupiah exchange rate on Friday, January 26, the rupiah spot exchange rate was closed lower by 0.01 percent Rp15,825 per US dollar. Meanwhile, Jisdor's rupiah exchange rate closed lower by 0.29 percent to a price level of Rp15,829 per US dollar.

Director of PT Laba Forexindo Berjangka Ibrahim Assuaibi said the market is now awaiting new signs regarding US monetary policy, starting with PCE price index data, the Fed's preferred inflation gauge, and fourth-quarter gross domestic product (GDP) data growing more than expected.

"The stagnant inflation, coupled with increasing signs of US economic resilience, provides space for the Fed to maintain higher interest rates over a longer period of time." he said in his statement quoted Monday, January 29.

Ibrahim said the Fed will hold a meeting next week and is expected to keep its interest rates. The market also expects the central bank to refrain from a March meeting, reversing previous expectations for a 25-base-point drop in interest rates.

Ibrahim also said that the People's Bank of China unexpectedly cut the ratio of reserve requirements for local banks, which is expected to spend nearly $140 billion in liquidity into the economy.

But analysts are still questioning how much economic support will be provided through monetary stimulus, given China is grappling with a severe slowdown in consumer and business spending.

From an internal point of view, the global economy continues to turbulent due to the impact of political tension both in the Middle East and Europe. However, the 2024 General Election Moment (Pemilu) can have a positive impact on economic growth or Gross Domestic Product (GDP) in the country. This is supported by well maintained political stability.

Ibrahim conveyed that historically, the moment of elections or presidential elections (Pilpres) and legislative elections (Pileg) contributed to the growth of real GDP in the 1-3 quarters before and after the people's democratic party, it was usually confirmed that some components of GDP would increase.

Meanwhile, this growth will be driven by consumption of Non- Profit Institutions that Serve Households (LNPRT) for election preparation. This means that the election cycle will be high at the LNPRT. Because this is a non-profit institution serving households, most of the mass organizations and political parties there even though the shares are small.

In addition, money supply in a broad sense (M2) will also grow in election moments. Data from Bank Indonesia (BI) as of December 2023 increased to IDR 8,824.7 trillion, grew 3.5 percent yoy higher than the previous month's growth of 3.3 percent yoy.

Ibrahim estimates that the rupiah will fluctuate but closed lower on Monday's trading January 29 in the price range of IDR 15,820- IDR 15,890 per US dollar.