Rupiah Predicted to be Sluggish Amidst Market Waiting for US Data Release

Rupiah Dollar (Photo: antara)

JAKARTA - The rupiah exchange rate on trading Tuesday, May 14 2024 is expected to weaken against the United States (US) dollar.

Director of PT Laba Forexindo Berjangka Ibrahim Assuaibi estimates that the rupiah will fluctuate but close lower in trading Tuesday, May 14 2024 in the price range of IDR 16,060 - IDR 16,130 per US dollar.

He said most traders remained biased towards the greenback ahead of producer price index data for April due to be released on Tuesday.

Meanwhile, the more closely watched consumer price index data due on Wednesday will be the main focus, given that it will likely factor into the US interest rate outlook.

"The dollar experienced large fluctuations last week as mixed US economic data raised questions about when the central bank would start cutting interest rates this year. However, even though the US economy appears to be slowing in recent months, inflation is expected to remain stable," he explained in his official statement, quoted Tuesday, May 14.

Ibrahim said consumer price index inflation increased more than expected in April, as persistent stimulus measures from Beijing helped boost demand. However, producer price index inflation shrank for 19 consecutive months, as China's business activity remained sluggish.

The inflation data shows that Beijing still has a lot of work to do to support economic growth.

Ibrahim said traders were also wary of China after reports last week said the Biden administration was preparing more trade tariffs against the country, especially on China's electric vehicle sector.

"This step could re-trigger a trade war between countries with the largest economies in the world," he said.

Additionally, the European Central Bank has promised a rate cut on June 6, but there is uncertainty over how many further rate cuts the central bank will agree to this year.

Ibrahim said that the market is currently expecting an increase in interest rates of 70 basis points this year.

From an internal perspective, the Government continues to be alert to the threat of an uncertain global economy. Among them, the never-ending geopolitics of Russia and Ukraine, the conflict in the Middle East is increasingly heating up, namely tensions between Israel and Palestine are still ongoing, plus Iran's attack on Israel.

Apart from that, economic growth in Europe is still low, and with the election just around the corner, the most worrying thing is that extreme right movements in Europe will rise. It is feared that this could have an impact on the domestic economy.

Even so, Indonesia's economic growth will remain resilient. This is in line with Indonesia's economic growth in the first quarter of 2024 which grew by 5.11 percent, higher than the fourth quarter of 2023 which amounted to 5.04 percent, which was supported by the momentum of Ramadan and Eid 2024, as well as the 2024 general election, which ultimately increased domestic consumption.

Indonesia's strong economic growth is reflected in the Indonesian Manufacturing PMI in April 2024 reaching 52.9. Increasing the number of new workers, which also reduces the unemployment rate. In February 2024, the number of working people will reach 142.18 million people, or an increase of 3.5 million compared to February 2023 which was 138.63 million people.

Previously, Bloomberg data showed that the Rupiah exchange rate on Monday, May 13 2024, the spot rupiah exchange rate closed down 0.21 percent to IDR 16,081 per US dollar. Likewise, the Jakarta Interbank Spot Dollar Rate (Jisdor) Bank Indonesia (BI) rupiah exchange rate closed down 0.02 percent to a price level of IDR 16,085 per US dollar.