Rupiah Predicted To Continue Strengthening, Market Expected Fed Rate Dipangkas

The rupiah exchange rate (between)

JAKARTA - The rupiah exchange rate in trading Tuesday, August 27, 2024 is expected to move higher against the United States (US) dollar.

Quoting Bloomberg, the Rupiah exchange rate on Monday, August 26, 2024, the rupiah exchange rate on the spot market closed up 0.35 percent at the level of Rp. 15,438 per US dollar. Meanwhile, the Jakarta Interbank Spot Dollar Rate (Jisdor) exchange rate of Bank Indonesia (BI) closed up 1.12 percent to a price level of Rp. 15,380 per US dollar.

Director of PT Profit Forexindo Berjangka Ibrahim Assuaibi said Federal Reserve Chairman Jerome Powell gave a clear signal that the long anticipated US interest rate cut will occur next month.

"At his keynote address at the Kansas City Fed's annual economic conference in Jackson Hole, Wyoming, Powell said it was time for the policy to adjust, given the risk of rising inflation has decreased and the risk of lowering employment has increased," he said in a statement, quoted Tuesday, August 27.

Ibrahim said traders on Friday continued to bet on a quarter-point percentage cut in interest rates at the Fed meeting on September 17-18, with a 65 percent chance following Powell's statement.

However, they expect an opportunity of about one in three to cut interest rates by 50 basis points that is larger, up from previous opportunities that were slightly more than one in four.

From the domestic side, lately national politics is not doing well. A big wave of demonstrations over the plan to ratify the revision of the Pilkada Law (RUU) that occurred Thursday, August 22 became the headline on almost all national, even international news. Although finally the DPR annulled the ratification of the Pilkada Bill, the political issue had influenced the rupiah exchange rate.

Responding to this condition, Bank Indonesia (BI) stated that the current political factor will no longer have a significant impact on the national economy. This can be seen from the less severe contraction experienced by the rupiah exchange rate, and the Indonesian people are now adults in responding to the dynamics of national politics.

In addition, if the current national economic fundamentals are very strong, political factors will not have a significant impact on national economic performance. These fundamental elements include very healthy economic growth, low inflation, and yields from high investment instruments.

This can be seen from the rupiah exchange rate which did not contract too deeply and strengthened again after global sentiment began to subside. In addition, domestically, economic growth of up to 5 percent and the inflation rate of around 2 percent in the long term show that the Indonesian economy is very sustainable in facing every turmoil.

Ibrahim estimates that the rupiah will fluctuate but close higher in trading on Tuesday, August 27, 2024, in the price range of IDR 15,370 - IDR 15,460 per US dollar.