JAKARTA - The rupiah exchange rate in trading Friday, June 28, 2024 is expected to weaken against the United States (US) dollar.
Quoting Bloomberg, the Rupiah exchange rate on Thursday, June 27, 2024, the rupiah exchange rate on the spot market closed slightly higher by 0.05 percent at the level of Rp. 16,406 per US dollar. Similarly, the Jakarta Interbank Spot Dollar Rate (Jisdor) exchange rate of Bank Indonesia (BI) closed up 0.08 percent to a price level of Rp. 16,421 per US dollar.
Director of PT.Laba Forexindo Berjangka Ibrahim Assuaibi said that the flow into the dollar was mainly driven by the anticipation of PCE price index data, which will be released on Friday. This figure is a measure of Fed's choice of inflation, and is expected to be a factor in the central bank's attitude towards interest rates.
"PCE data is expected to show inflation will decline slightly in May, but it remains above the Fed's annual target of 2 percent," he said in his statement, quoted Friday, June 28.
Ibrahim said the stagnant inflation gave the Fed more space to maintain higher interest rates longer a scenario that had a bad impact on gold and precious metals.
hawkish comments from Fed officials also reinforce expectations of high interest rates in recent sessions. Higher interest rates will increase the cost of opportunities (opportunity costs) in investing in assets that do not provide yields (non-yielding), and make traders more biased against the US dollar and debt.
From an internal point of view, in the face of uncertain conditions, economists reminded the Government, Bank Indonesia and other authorities to be extra careful in guarding the rupiah currency, which is currently breaking the psychological level above Rp. 16,400 per US dollar.
Despite this level, the government and monetary authorities should not allow the rupiah exchange to penetrate at the level of Rp. 16,500 per US dollar, because this level is a very critical level so that it will continue to accumulate negative sentiment for financial market players from what has emerged today, making it difficult to tame and potentially decline to Rp. 17,000 per US dollar.
In addition, the hawkish attitude of the Fed caused an increase in yields of United States (US) bonds and at the same time put pressure on emerging market countries, including Indonesia.
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Meanwhile, geopolitical conflicts in the Middle East and Europe that are prolonged, the US trade war, the EU with China and the heat of the presidential election in the US are one of the factors that suppress the rupiah currency, which has a fairly high portion.
In addition, there are domestic economic data that affect market sentiment, including Indonesia's current account deficit which increased from US$1.1 billion to US$2.2 billion in the first quarter of 2024, the Purchasing Managers' Index (PMI) of Indonesia fell from 52.9 to 52.1 in May 2024 and the Indonesian Consumer Confidence Index (IKK) fell from 127.7 to 125.2 in May 2024.
Other factors include increasing investor ownership of other instruments such as SBN, SBSN, and SRBI, lowering Indonesia's share rating by Morgan Stanley, volatility in the price of certain stocks, etc.
Ibrahim estimates that the rupiah will fluctuate but close lower in trading Friday, June 28, 2024, in the price range of IDR 16,390 - IDR 16,450 per US dollar.
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