US Inflation Release Wait Market, Rupiah Has The Potential To Weaken Again

Rupiah (photo: dock. Antara)

JAKARTA - The rupiah exchange rate in trading Wednesday, May 29, 2024 is expected to weaken again against the United States (US) dollar.

Quoting Bloomberg, the Rupiah exchange rate on Tuesday, May 28, 2024, the rupiah spot exchange rate closed down 0.12 percent to the level of Rp. 16,090 per US dollar. Similarly, the Jakarta Interbank Spot Dollar Rate (Jisdor) exchange rate of Bank Indonesia (BI) closed down 0.19 percent to a price level of Rp. 16,095 per US dollar.

Director of PT Profit Forexindo Berjangka Ibrahim Assuaibi said the focus this week is on PCE price index data, which will be released on Friday. This figure is a measure of the Federal Reserve's choice of inflation, and is likely to be a factor in the central bank's view of lower interest rates.

"PCE reading also appears because traders continue to expect the Fed's interest rate reduction expectations this year," he explained in his official statement, quoted Tuesday, May 28.

Ibrahim said the CME Fedwatch tools show traders now expect greater opportunities to maintain interest rates in September, compared to previous ones, which expect a broad drop in interest rates.

This trend comes as a series of Fed officials warn that high inflation will deter central banks from easing policies early. Although PCE's reading on Friday is expected to show a slight drop in price pressure, inflation is expected to remain well above the Fed's annual target of 2 percent.

This makes traders begin to expect a greater chance that the Fed will maintain its interest rates in September, compared to previous expectations that expect a 25-base-point drop in interest rates.

From an internal point of view, although the world is being colored by increasing tensions in the Middle East due to the Israeli attack on Rafah, Palestine. However, in terms of the global economy, there is good news, especially related to the Baltic Index. In terms of good news, the Baltic Index, which describes the volume of traffic from freight, namely transportation between countries, rose 112 percent compared to the December 2023 period.

This spike indicates an increase in international trade, driven by economic improvements in various countries, including China. This gives hope that global conditions can be better than predictions given by the IMF and the World Bank by 2024.

Despite positive signs in the global economy, geopolitical tensions are still a threat that haunts world stability.

Escalation of the conflict in Gaza, where Israeli forces have entered Rafah, which has created extraordinary dynamics in the region. Tensionful relations between the United States and China also affect global conditions as a whole.

Thus, despite the good news in terms of improving the global economy, it is important for all parties to remain alert to geopolitical tensions that can affect the stability and growth of economists around the world.

Ibrahim estimates that the rupiah will fluctuate but closed lower in trading on Wednesday, May 29, 2024, in the price range of IDR 16,080 - IDR 16,140 per US dollar.