Rupiah Projected to Strengthen Supported by Domestic Economy

Illustration of Rupiah (Photo: between)

JAKARTA - The rupiah exchange rate in trading Monday 12 February 2024 is expected to move stronger again against the United States (US) dollar driven by the domestic economy.

Quoting Bloomberg, on the Rupiah exchange rate on Wednesday 7 February, the spot rupiah exchange rate closed up 0.60 percent, IDR 15,635 per US dollar. Meanwhile, the Jisdor rupiah exchange rate closed up 0.31 percent to a price level of IDR 15,685 per US dollar.

Director of PT. Profit Forexindo Berjangka, Ibrahim Assuaibi, said that the Institute for Supply Management (ISM) said that as the US economy is running according to expectations, this opens up opportunities for the Fed to reduce interest rates.

Market players currently estimate a 19.5 percent chance of a rate cut in March, according to CME Group's (NASDAQ:CME) FedWatch Tool, compared with a 68.1 percent chance at the start of the year.

"They also now estimate a cut of around 117 basis points (bps) at the end of 2024, compared to the anticipation of around 150 bps at the beginning of January," he explained in his statement quoted Monday, February 12.

Market concerns about China's economic health continue. Although Chinese authorities announced a number of measures to support the local stock market this week, they have done little to address the slow economic recovery in the country.

Meanwhile, China's inflation data for January will be released on Thursday. This data also appeared before the week-long Chinese New Year holiday.

From an internal perspective, Indonesia's economic growth in 2023 closed at 5.05 percent. This figure misses the government's target which projects economic growth in 2023 at around 5.31 percent.

The Central Statistics Agency (BPS) reports that the driving force for economic growth is still supported by household consumption which grew by 2.55 percent from total economic growth of 5.05 percent.

However, household consumption experienced a slowdown from 4.94 percent in 2022 to 4.82 percent in 2023. The 2024 General Election (Pemilu) should be one of the drivers of household consumption. However, there are indeed a number of factors that are stronger in influencing the weakening of household consumption.

Meanwhile, the driving factor for sluggish consumption is also influenced by the weakening global economy which has an impact on the country. This is because demand for exports from Indonesia's trading destination countries will weaken, where commodities will also decline and affect the income of people who make their living through export-oriented goods or services.

Apart from that, domestic policy factors also influenced the slowdown in household consumption, where fiscal expansion was not as large as during the post-pandemic national economic recovery (PEN) period.

Then, although monetary policy is not too tight, high interest rates affect credit distribution to the real sector. This also has an impact on weakening Indonesia's economic growth.

Ibrahim estimates that the rupiah will fluctuate but close higher in trading Monday, February 12 in the price range of IDR 15,600- IDR 15,670 per US dollar.