The Economist Projected That The Rupiah Could Strengthen Below IDR 16,000 Per US Dollar, As Long As...

Illustration (Photo: Doc Antara)

PT Mandiri Sekuritas projects that the rupiah exchange rate against the United States (US) dollar will strengthen again below the level of IDR 16,000 per US dollar, if the US Central Bank or the Federal Reserve lowers the Fed Fund Rate's benchmark interest rate (FFR) in the third quarter of 2024.

Chief Economist of Mandiri Sekuritas Rangga Cipta said that the movement of the rupiah is still very dependent on the expectations of cutting the Fed Fund Rate, which is predicted to be cut during the second semester of 2024.

"If we look at this side, the greater the hope of cutting the Fed interest rate, this should be good for the rupiah. So we can see that maybe in the second semester the rupiah should be stronger. We see that in the third quarter, maybe the rupiah could strengthen below Rp. 16,000, maybe in the range of Rp. 15,900," said Rangga at the launch of the Digital Growin Platform' by Mandiri Sekuritas & Economic and Market Outlook, Wednesday, August 7.

However, Rangga is still wary of the dynamics of the domestic and foreign economy in the fourth quarter of 2024, so he estimates that the rupiah will fall again above Rp. 16,000 per US dollar due to the dynamics that occurred.

From the domestic side, Rangga conveyed that the certainty of fiscal and composition of the cabinet of Elected President Prabowo Subianto would be confirmed at the interval so that it would be one of the effects of the movement of the rupiah exchange rate in the fourth quarter of 2024.

Meanwhile, from the global side, Rangga said, the rupiah exchange rate would be under pressure because there were elections in the US so that they remained vigilant about the election process that took place in the US.

According to Rangga, this is based on a survey showing that Donald Trump's presidential candidate is the leading presidential candidate in this election and outperforms the candidate for Democrat, Kamala Harris.

"This raises fears that America will be more aggressive towards China. We know we export to China is almost 25 percent. So if China's economy is increasingly disrupted, surely our exports there will also be disrupted. That might be able to develop the rupiah in the fourth quarter on the global side," he said.

In addition, Rangga said, the narrative Trump said indicated that he would increase the import rate of goods, especially those from China, as he did in 2018-2019.

"This has a spillover to Indonesia, Indonesia's exports to China have dropped. This is why the trade balance can be depressed by this," he said.

Rangga said the US (US) central bank of the Federal Reserve is projected to cut the Fed Fund Rate's benchmark interest rate twice, which is 25 basis points (bps) each in the second semester of 2024.

As for the future, Rangga explained, there have been many signs of a weakening of the US economy in line with market expectations that the Fed will cut interest rates in September.

"Well, from the community, we see that maybe in the second semester we can cut it twice, 25bps. But indeed seeing the latest developments the risk is for more Fed cuts and faster," said Rangga.