Market Hopes US Interest Rate Drops 110 Bps, Rupiah Potentially Strengthens

Illustration. (Photo: Doc. Antara)

JAKARTA - The rupiah exchange rate in trading Thursday, August 8 is expected to move higher against the United States (US) dollar.

Quoting Bloomberg, the Rupiah exchange rate on Wednesday, August 7, 2024, the rupiah exchange rate on the spot market closed up 0.80 percent at the level of Rp. 16,035 per US dollar. Meanwhile, the Jakarta Interbank Spot Dollar Rate (Jisdor) exchange rate of Bank Indonesia (BI) closed higher by 0.51 percent to a price level of Rp. 16,100 per US dollar.

Director of PT Profit Forexindo Berjangka Ibrahim Assuaibi said the weakening of carrier trading was combined with US job data that were weaker than expected on Friday, and the disappointing profit from big tech companies triggered global equity sales, which further strengthened the weakening.

"The traders now expect an easing of 110 basis points this year from the Fed, estimating an opportunity of nearly 70 percent from a 50 bps cut in September, down from 85 percent on Monday, according to the CME FedWatch tool," Ibrahim said in his statement, quoted Thursday, August 8.

But US central bank policymakers on Monday rejected the notion that July's work data was weaker than expected means the economy was in recession, but also warned that the Fed needed to cut interest rates to avoid such results.

From the domestic side, Bank Indonesia (BI) said the position of Indonesia's foreign exchange reserves at the end of July 2024 was recorded at 145.4 billion US dollars, an increase compared to the position at the end of June 2024 of 140.2 billion US dollars. The increase in the position of foreign exchange reserves was mainly influenced by the issuance of global government sukuk as well as tax and service revenues.

The position of foreign exchange reserves at the end of July 2024 is equivalent to financing 6.5 months of imports or 6.3 months of imports and payment of government foreign debt, and is above the international adequacy standard of about three months of imports.

Bank Indonesia assesses that foreign exchange reserves are able to support the resilience of the external sector and maintain macroeconomic and financial system stability. In the future, BI views foreign exchange reserves as adequate so that it can continue to support the resilience of the external sector.

The export prospects that remain positive and the balance of capital and financial transactions are expected to continue to record a surplus in line with investor positive perceptions of the national economic outlook and attractive investment returns, supporting maintained external resilience.

Bank Indonesia also continues to strengthen synergies with the government in strengthening external resilience so that it can maintain economic stability in order to support sustainable economic growth.

Ibrahim estimates that the rupiah will fluctuate but close higher in trading Thursday, August 8, 2024, in the price range of IDR 15,980 - IDR 16,050 per US dollar.