The Fed's Interest Rate Cut Signal Is Getting Higher, Rupiah Has The Potential To Strengthen

Illustration (Photo: Doc Antara)

JAKARTA - The rupiah exchange rate in trading Tuesday, August 6, 2024 is expected to move higher against the United States (US) dollar.

Quoting Bloomberg, the Rupiah exchange rate on Monday, August 5, 2024, the rupiah exchange rate on the spot market closed up 0.07 percent at the level of Rp. 16,189 per US dollar.

Meanwhile, the Jakarta Interbank Spot Dollar Rate (Jisdor) exchange rate of Bank Indonesia (BI) closed up 0.49 percent to a price level of IDR 16,154 per US dollar.

Director of PT Laba Forexindo Berjangka Ibrahim Assuaibi conveyed a series of disappointing US economic readings, especially on manufacturing activities and labor markets, prompting the world's largest economic concern to slow down faster than previously thought.

Ibrahim said weaker economic prospects also led traders to estimate the Federal Reserve's potential for deeper cut in interest rates, which recently hinted that a cut in interest rates in September might occur.

"The central bank is expected to have the potential to cut interest rates by 50 basis points in September and could end the year with interest rates dropping by 100 basis points, the CME Fedwatch shows," he said in a statement, quoted Tuesday, August 6.

From a domestic perspective, the Central Statistics Agency (BPS) recorded Indonesia's economic growth in the second quarter of 2024 of 5.05 percent on an annual basis (yoy).

This figure is lower than the second quarter of 2023, which was 5.17 percent.

Meanwhile, on a quarterly basis, Indonesia's economic growth was recorded at 3.79 percent.

Meanwhile, throughout the first half of 2024 economic growth reached 5.08 percent.

Previously, the government through the ministry of finance projected that Indonesia's economic growth in the second quarter of 2024 would reach 5.0 percent on an annual basis (yoy).

This economic growth was driven by maintained household consumption and increased investment.

Ibrahim said that when viewed back, first-quarter economic growth in 2019 was 5.06 percent.

Then it fell in 2020 to 2.97 percent due to the pandemic. Then in 2021 it fell deeper to 0.69 percent.

However, in the first quarter of 2022, the country's economy began to rise by growing 5.02 percent and in 2023 it rose slightly with a growth of 5.04 percent.

Then, in the first quarter of 2024, Indonesia's economic growth reached 5.11 percent.

Meanwhile, the Indonesian economy based on GDP at current prices (ADHB) was recorded at IDR 5,536.5 trillion.

Meanwhile, on the basis of constant prices (ADHK) amounting to IDR 3,231 trillion. When viewed from the source of growth in the second quarter of 2024, the manufacturing industry is the largest source of growth.

In addition, economic growth was also shared by the construction business field with a source of 0.67 percent growth, trade with a source of 0.63 percent growth, as well as information and communication with a source of 0.5 percent growth.

Ibrahim estimates that the rupiah will fluctuate but close higher in trading on Tuesday, August 6, 2024, in the price range of Rp. 16,140 to Rp. 16,210 per US dollar.