Hit By The Issue Of The Reference Interest Tribe Down, Rupiah Strengthens

Rupiah (photo: dock. Antara)

JAKARTA - The rupiah exchange rate in Monday's trading on February 5, 2024 is expected to fluctuate again but close higher against the United States (US) dollar in line with the expeditation of the reduction in the benchmark interest rate.

Quoting Bloomberg, the Rupiah exchange rate on Friday, February 2, the rupiah spot exchange rate closed higher by 0.55 percent Rp15,660 per US dollar. Meanwhile, Jisdor's rupiah exchange rate closed up 0.67 percent to a price level of Rp15,688 per US dollar.

Director of PT Profit Forexindo Berjangka Ibrahim Assuaibi said the market was looking forward to lowering interest rates in May in line with the nonfarm payroll approach After the Fed underestimated the estimated decline in interest rates in March, traders began to expect a 25-base point rate drop in May.

"The CME Fedwatch shows traders expect a chance of lowering interest rates in May by more than 60 percent, and analysts also expect the Fed to lower interest rates at least four more times after May," he said in a statement quoted Monday, February 5.

While such a scenario is a good sign for risk-driven Asian currencies, the Fed has yet to provide indications that it will cut interest rates on a large scale by 2024.

The central bank reiterated that their plans to lower interest rates will largely be determined by inflationary routes, which are still inherent so far.

Non-farm payroll data is expected to provide more clues to the labor market. The Fed also mentioned the weakening of the labor market as one of the main factors that boost interest rates.

From an internal point of view, Bank Indonesia stated that the Indonesian economy will be one of the best in the world in 2023 with economic growth of around five percent. This is accompanied by inflation of 2.61 percent or one of the lowest in the world.

This achievement is a proud achievement if you look at economic growth and inflation of developed countries that are under pressure. For example, the US economy which only reached three percent last year, China last year was five percent, this year 4.6 percent.

BI predicts that the global economic wave in 2024 and 2025 will be lower than 2023 or 2022. One of the factors that can drive global economic dynamics this year is the election contestation (election) that will occur in 54 countries in 2024.

In addition, BI is also optimistic that the Fed Fund Rate will begin to decline by 75 basis points in the second half of 2024. Likewise with the weakening of the US dollar which will also begin to occur when entering the second half of 2024.

In order to maintain a positive trend, the government has five synergies of national economic policy. This includes monetary fiscal policy, SSK policy and acceleration of the transformation of the financial sector, acceleration of digitalization of the national financial economy, downstream mining and non-minerba, as well as investment and infrastructure trade policies.

Ibrahim estimates that the rupiah will fluctuate but close higher on Monday's trading on February 5 in the price range of IDR 15,610- IDR 15,700 per US dollar.