Market Waits For Fed Interest Rate, Rupiah Potentially Continues Weakening

Rupiah illustration (Photo: dock. Antara)

JAKARTA - The rupiah exchange rate in trading Thursday, March 21, 2024, is expected to resume its movement to continue its weakening of the United States (US) dollar until the announcement of the Federal Reserve interest rate direction.

Quoting Bloomberg, the Rupiah exchange rate on Wednesday, March 20, the rupiah spot exchange rate was closed lower by 0.03 percent Rp15,723 per US dollar. Meanwhile, the Jakarta Interbank Spot Dollar Rate (Jisdor) of Bank Indonesia (BI) closed down 0.09 percent to a price level of Rp15,727 per US dollar.

Director of PT.Laba Forexindo Berjangka Ibrahim Assuaibi said the market focused on the conclusion of the Fed meeting on Wednesday, where the central bank is expected to maintain interest rates. However, any signal regarding its plan to lower interest rates by 2024.

"The traders are concerned about the potential hawkish stance from the central bank, given that inflation has been recorded to be higher than expected over the past two months," he said in his statement quoted on Thursday, March 21.

Ibrahim said the focus in particular was on a press conference with Fed Chairman Jerome Powell after the meeting. The central bank has the potential to be hawkish and cut prospects for lower interest rates this year, especially after inflation was higher than expected over the past two months

From an internal point of view, Bank Indonesia (BI) decided to maintain the benchmark interest rate or BI Rate at the level of 6 percent at the March Board of Governors Meeting (RDG) 2024. The Deposit Facility interest rate remained at 5.25 percent and the Lending Facility was 6.75 percent.

The decision to maintain BI-Rate at the level of 6.00 percent remains consistent with the focus of pro-stability monetary policy, namely to maintain the stabilization of the Rupiah exchange rate and pre-emptive and forward looking steps to ensure inflation remains under control in the 2.5 plus minus 1 percent target by 2024.

Previously, analysts' consensus had also estimated that the benchmark interest rate or BI rate would hold back at the level of 6 percent. As is known, BI has previously maintained its benchmark interest rate for 4 months since it was last raised in October 2023 by 25 basis points.

In addition, the market is also waiting for the official announcement of the election results released by the General Elections Commission (KPU), although it can be guessed that the candidate to win the presidential election contest is candidate pair 02, namely Prabowo Gibran, but the KPU's decision will be nominated with demonstrations on behalf of Paslon 01 and candidate pair 03 regarding fraud in the presidential election.

Ibrahim estimates that the rupiah will fluctuate but close lower on trading Thursday, March 21 in the price range of IDR 15,710 - IDR 15,780 per US dollar.