Rupiah Potentially Continue Strengthening At Loyo US Dollar

Rupiah Dollar (Photo: intermediate)

JAKARTA - The rupiah exchange rate in trading Monday, June 10, 2024 is expected to move again higher against the United States (US) dollar.

Quoting Bloomberg, the Rupiah exchange rate on Friday, June 7, 2024, the rupiah spot exchange rate closed higher by 0.42 percent to the level of Rp. 16,195 per US dollar. Similarly, the Jakarta Interbank Spot Dollar Rate (Jisdor) exchange rate of Bank Indonesia (BI) closed up 0.37 percent to a price level of Rp. 16,218 per US dollar.

Director of PT Profit Forexindo Berjangka Ibrahim Assuaibi expressed sentiment towards risk-based assets improving this week following the decline in the interest rates of the European Central Bank and the Central Bank of Canada.

"Greenback has been hit hard by weak economic data, especially in the labor sector, which raises expectations that the Federal Reserve will be increasingly confident in cutting interest rates this year," he explained in his official statement, quoted Monday, June 10.

Ibrahim said traders raised their stakes on cutting interest rates by 25 basis points in September.

In addition, the Fed will also hold a meeting and is expected to keep interest rates stable and the market is currently waiting for comments from the central bank governor which will be used as a benchmark in the future on whether to maintain interest rates or lower interest rates in September.

From an internal point of view, Bank Indonesia (BI) recorded Indonesia's foreign exchange reserves of 139 billion US dollars or equivalent to Rp2,254.8 trillion (exchange rate of Rp. 16,222/dolarAS) at the end of May 2024. This position increased by US$ 2.8 billion or Rp. 45 trillion when compared to the position in the previous month of US$136.2 billion US dollars.

The development of foreign exchange reserves in May 2024 was influenced by tax and service revenues, as well as the issuance of a global government bond. The position of foreign exchange reserves in May 2024 is equivalent to financing 6.3 months of imports or 6.1 months of imports and payment of government foreign debt.

On the other hand, US dollar demand entering the Hajj season tends to increase for payment of Hajj activities. This has the potential to erode the potential increase from foreign exchange reserves.

Furthermore, US Dollar requests when distributing dividends and coupons to non-residents, as well as principal debt payments also have the potential to encourage a reduction in foreign exchange reserves.

The position of foreign exchange reserves is also still above the international adequacy standard of about 3 months of imports. BI views that foreign exchange reserves in the future will remain adequate, supported by stability and maintained national economic prospects.

This is also in line with the synergy of policy mix responses taken by BI and the government in maintaining macroeconomic and financial system stability to support sustainable economic growth.

Ibrahim estimates that the rupiah will fluctuate but close higher in trading Monday, June 10, 2024, in the price range of IDR 16,140 - IDR 16,230 per US dollar.