Rupiah Potentially Continue Strengthening Driven By Expectations For Cutting The Fed's Interest Rate

Rupiah exchange rate (Photo: dock. Antara)

JAKARTA - The rupiah exchange rate in trading Monday, August 26, 2024 is expected to move higher against the United States (US) dollar.

Quoting Bloomberg, the Rupiah exchange rate on Friday, August 23, 2024, the rupiah exchange rate in the spot market closed up 0.69 percent at the level of Rp15,492 per US dollar. Meanwhile, the Jakarta Interbank Spot Dollar Rate (Jisdor) exchange rate of Bank Indonesia (BI) closed higher by 0.16 percent to a price level of Rp15,554 per US dollar.

Director of PT. Laba Forexindo Berjangka Ibrahim Assuaibi said that the current US dollar movement was influenced by concerns about the weakening of the economy and expectations that the Federal Reserve would soon cut interest rates.

"However, the extent of the weakening, and whether it will cause the US central bank to cut interest rates by 25 or 50 basis points at its meeting in September, remains questionable," he said in a statement, quoted Monday, August 26.

Ibrahim said traders would focus on Powell's statement, to get new clues about the large drop in interest rates expected in September and whether the next drop in interest rates might have occurred at every meeting afterwards.

"Powell may be reluctant to provide too much detail, as work data and inflation in August will be released following his speech, but before the September 17-18 meeting. The fault of the Fed meeting on July 30-31 released on Wednesday suggests that "most of" officials said a drop in interest rates in September may have occurred," he explained.

From a domestic perspective, the DPR in its press conference canceled the revision of the 2024 Pilkada (RUU) formulation and there was no plenary meeting towards the end of the Pilkada registration on August 27, 2024.

Following the DPR's statement, the General Election Commission (KPU) of the Republic of Indonesia confirmed that the registration of candidate pairs for regional heads would be guided by the decision of the Constitutional Court. The KPU also ensured that the Constitutional Court's decision would be followed up in the Pilkada PKPU.

With this announcement, it makes the public and investors calm and believe that democracy in Indonesia will run according to existing rails. So that it can invest in its own interests for investors to re-enter the domestic financial market, because the site and political conditions have returned to calm and stable.

In addition, the Prabowo Subianto Government in 2025 is planned to pay interest on debt of IDR 552.85 trillion.

This is stated in the 2025 State Revenue and Expenditure Budget Draft (RAPBN). This figure is up 10.8 percent from the outlook for debt interest payments in the 2024 fiscal year which is valued at IDR 499.0 trillion.

Ibrahim estimates that the rupiah will fluctuate but close higher in trading Monday, August 26, 2024, in the price range of IDR 15,400 - IDR 15,520 per US dollar.