Amid US Concerns Of Recession, Rupiah Potentially Strengthens

Rupiah and US dollars (Photo: intermediate)

JAKARTA - The rupiah exchange rate in trading Wednesday, August 7, 2024 is expected to move higher against the United States (US) dollar.

Quoting Bloomberg, the Rupiah exchange rate on Tuesday, August 6, 2024, the rupiah exchange rate on the spot market closed up 0.15 percent at the level of Rp. 16,165 per US dollar. Meanwhile, the Jakarta Interbank Spot Dollar Rate (Jisdor) exchange rate closed lower by 0.17 percent to a price level of Rp. 16,183 per US dollar.

Director of PT Profit Forexindo Berjangka Ibrahim Assuaibi conveyed US job data that were weaker than expected, along with reports of disappointing profits from major technology companies and growing concerns over China's economy, have sparked global sell-offs on high-result stocks, oil and currencies in the past week as investors seek cash security.

Ibrahim said the sell-off continued on Monday, with the US Treasury yield dropping further, stock index in the red zone, and the dollar weakening.

"The Treasury yields have fallen sharply since last week, when the Fed maintained policy interest rates in the range of 5.25 percent to 5.50 percent when Fed Chairman Jerome Powell opened the possibility of lowering interest rates in September," he said in a statement, quoted Wednesday, August 7.

But on Friday, after data showed unemployment rates soared, expectations for lower interest rates increased. The Japanese yen spike occurred as traders aggressively stopped trading carry.

Ibrahim explained the so-called carry trade, where investors borrow money from countries with low interest rates such as Japan or Switzerland to fund investments in higher-result return assets elsewhere, has been popular in recent years.

"On Monday, Fed's futures contract reflects traders estimating a nearly 100 percent chance of cutting 50 basis points at a September central bank meeting, according to the CME FedWatch," he explained.

Ibrahim said the focus this week is on more economic reading from China, especially trading and inflation data which will be released later this week.

From a domestic perspective, the government will boost government consumption in the third and fourth quarters of 2024 to encourage economic growth at the end of the year. This is because government consumption in the second quarter of 2024 has slowed. Because the government wants to move sectors outside the government to encourage economic growth.

Meanwhile, in the second quarter of 2024, government consumption grew 1.42 percent, with a contribution to GDP of 7.31 percent. Meanwhile, in the first quarter of 2024, government consumption grew 24.29 percent, with a contribution of 1.43 percent.

However, for the third quarter and fourth quarter of 2024, the government will see what other factors can be encouraged. However, especially government spending will be pushed first. So that government spending will be boosted in the third quarter.

For information, the Central Statistics Agency (BPS) noted that Indonesia's economic growth in the second quarter of 2024 grew by 5.05 percent on an annual basis (yoy). Meanwhile, quarter-on-quarter (qtq) decreased by 3.79 percent compared to the first quarter of 2024.

Deputy for Balance and Statistics Analysis Moh. Edy Mahmud said the value of Gross Domestic Product (GDP) on the basis of applicable prices (ADHB) in Indonesia until the second quarter of 2024 reached IDR 5,536.5 trillion and on the basis of constant prices (ADHK) IDR 3,231 trillion.

Ibrahim estimates that the rupiah will fluctuate but close higher in trading on Wednesday, August 7, 2024, in the price range of Rp. 16,110 - Rp. 16,180 per US dollar.