The Rupiah Exchange Value Is Projected To Strengthen In The Fourth Quarter Of 2024

Illustration. (Photo: Doc. Antara)

JAKARTA - BS Group Research projects that the rupiah exchange rate against the United States (US) dollar will strengthen in the fourth quarter of this year, assuming the US central bank or the Fed lowers interest rates close to or precisely in the fourth quarter of 2024.

"In our view, (the rupiah exchange rate against the US dollar) in the third quarter will be sideways. Then by the end of this year, we will see a rupiah exchange rate against a stronger US dollar compared to the US dollar," said FX Strategic, Global Financial Markets DBS Bank, Terence Wu in Jakarta, quoted from Antara, Wednesday, July 3.

He estimates that the trend of weakening the rupiah will still occur in the third quarter of this year, although it has not weakened significantly. In addition to the uncertain cut in interest rates, he explained, the weakening of the rupiah is also in line with the weakening currencies in Asian countries.

DBS projects that the rupiah exchange rate against the US dollar in the third quarter will be in the range of Rp. 16,000 to Rp. 16,500 per US dollar. At the end of the year, the rupiah strengthened in the range of Rp. 16,000 or slightly below Rp. 15,800 if the Fed lowered interest rates.

Terence added that an important factor that also affects the movement of the rupiah, namely differences in yields or returns from Indonesian government bonds and US Treasury bonds. Currently, he said, the difference between the two bonds is still a bit small and is expected to grow when it is near the end of the year.

"Spread (the bonds of the Indonesian government and US government bonds) when entering the second half of this year, will start to take sides with the rupiah even more. And in my opinion, that is also one of the reasons why the rupiah will strengthen at the end of the year," he said.

Equities Specialist DBS Group Research Maynard Arif added that the projection of DBS is that Bank Indonesia (BI) will also not lower interest rates or BI-Rate until the end of the year. If the rupiah experiences a very significant weakening, there is still the possibility of BI raising interest rates. But on the other hand, it is estimated that BI-Rate cuts will not precede the Fed's policy.

"The possibility is that BI lowering interest rates will wait or wait first from the Fed's policy. When the Fed lowers interest rates, maybe BI will only think about lowering interest rates. But before the Fed lowers interest rates, it looks like BI will continue to maintain (an interest rate of 6.25 percent), especially the condition of the rupiah which is still around Rp. 16,300-Rp. 16,500," said Maynard.