Today's Rupiah Movement Is Predicted To Weaken Due To Sentiment Of The Fed

Illustration. (Photo: Doc. Antara)

JAKARTA - The rupiah exchange rate in trading Wednesday, April 3, 2024, is expected to continue to weaken the United States (US) dollar.

Quoting Bloomberg, the rupiah spot closed slightly lower by 0.02 percent to a price level of IDR 15,897 per US dollar in trading on Tuesday, April 2. Similarly, the rupiah at the Jakarta Interbank Spot Dollar Rate (Jisdor) of Bank Indonesia (BI) fell 0.01 percent to the level of IDR 15,897 per US dollar.

Director of PT Profit Forexindo Berjangka Ibrahim Assuaibi said the ISM manufacturing purchase manager's index unexpectedly rose to 50.3 from 47.8. The reading of the index exceeded 50, indicating expansion in the manufacturing sector, for the first time since September 2022, as production increased sharply and new orders increased, highlighting the economic power and raising doubts about the time to lower the Fed's interest rate.

"Strong manufacturing data makes the yields of US Treasury higher, with bond yields of two years and 10 years up to the highest level in two weeks, thereby increasing the dollar," he explained in his official statement, quoted Wednesday, April 3.

The market now expects a 61 percent chance for the Fed to cut interest rates in June, compared to 70 percent in the previous week, according to the CME FedWatch Tool. They also expect a 68-base point cut this year.

However, Ibrahim conveyed strong economic data compared to core PCE price index data, which is a measure of the Fed's choice of inflation, which slowed more than expected in February, suggesting that the recent shock of rising inflation may be a deviation from recent deflation trends.

From an internal point of view, the market continues to monitor the position of government debt, which was recorded at IDR 8,319.2 trillion until February 29, 2024. This number increased from the position at the end of January, which was valued at IDR 8,253.09 trillion or an increase of IDR 66.13 trillion in the period of one month.

Meanwhile, this government debt is equivalent to 39.06 percent of gross domestic product (GDP) and continues the highest trend of all time.

Meanwhile, in the March 2024 edition of our APBN book, it noted that the debt ratio in February was still below the safe limit for the debt ratio in accordance with Law (UU) NO. 17/2023 which amounted to 60 percent. The management of debt portfolios plays a major role in maintaining overall fiscal sustainability.

Therefore, the government consistently manages debt carefully and measurably by maintaining the risk of interest rates, currencies, liquidity, and optimal maturity.

In addition, the government prioritizes the procurement of debt with a medium-long period and actively manages debt portfolios.

Disciplined debt management also supports the results of the assessment of credit rating institutions (S&P, Fitch, Moody's, R&I, and JCR) which to date maintain Indonesia's sovereign rating at the investment grade level amid the dynamics of the global economy and financial market volatility.

In addition, Bank Indonesia continues to mix economic strategies to stabilize the rupiah exchange rate and continue to carry out major interventions in foreign exchange markets, bonds in the Domestic Non Deliverable Forward (DNDF) trade, although later it will have an impact on decreasing foreign exchange reserves.

However, what BI has done is in accordance with regulations aimed at containing the weakening of the rupiah currency, as a result of the increase in global inflation.

Ibrahim estimates that the rupiah will fluctuate but closed lower in trading on April 3, 2024, in the price range of IDR 15,880 - IDR 15,940 per US dollar.