Shadowed by Fed Rate Cut, Rupiah Predicted to Weaken to IDR 15,520 per US Dollar

Rupiah (photo: dock. Antara)

JAKARTA - The rupiah exchange rate on Monday, September 2, 2024, is expected to weaken against the United States (US) dollar.

Quoting Bloomberg, the rupiah exchange rate on Friday, August 30, 2024, the rupiah exchange rate on the spot market closed down 0.20 percent at IDR 15,455 per US dollar. Meanwhile, the rupiah exchange rate at the Jakarta Interbank Spot Dollar Rate (Jisdor) Bank Indonesia (BI) closed down 0.41 percent to IDR 15,473 per US dollar.

Director of PT. Laba Forexindo Berjangka Ibrahim Assuaibi said the US dollar was helped by signs of continued resilience in the US economy, after gross domestic product data released on Thursday showed the economy grew more than expected in the second quarter.

"PCE price index data, the Fed's preferred inflation gauge, is due out on Friday and is also expected to show inflation picked up slightly in July. A strong economy and sluggish inflation make the Fed less eager to cut rates sharply," he said in a statement, quoted Monday, September 2.

While traders are still holding out for a September easing, they are leaning toward a smaller cut of 25 basis points, CME Fedwatch showed.

Domestically, the government will pay attention to factors driving economic growth so that the economic growth target of 5.1 percent can be achieved in the third quarter of 2024.

Ibrahim said that the government will continue to pay attention to consumption, investment, exports, and imports, in order to maintain economic growth at 5.1 percent. In addition, domestic politics are increasingly stable after the 2024 presidential election.

Based on data from the Central Statistics Agency (BPS), Indonesia's economic growth in the second quarter of 2024 grew by 5.05 percent (year on year/yoy) supported by strong domestic demand and increasing export performance.

In terms of expenditure, household consumption as the main contributor grew by 4.93 percent (yoy) driven by the longer religious holiday and school holiday periods.

In addition, people's purchasing power is still maintained along with controlled inflation, an increase in ASN salaries, the provision of the 13th salary with a 100 percent performance allowance, and the creation of new jobs that are greater in early 2024 amounting to 3.55 million.

Meanwhile, government consumption grew positively by 1.42 percent, mainly supported by the absorption of capital expenditure and goods expenditure which were quite high, respectively by 39.5 percent and 6.1 percent.

Meanwhile, investment growth or Gross Fixed Capital Formation (PMTB) was recorded to have strengthened by 4.43 percent (yoy) supported by the performance of building investment growth which grew by 5.31 percent.

One of the driving factors for increased investment is the high absorption of government capital expenditure related to the completion of various National Strategic Projects (PSN), including the construction of the Indonesian Capital City (IKN).

In addition, the Government will continue to monitor the risk of global economic stagnation which is expected to continue throughout 2024. The 2024 State Budget will continue to be optimized to maintain the stability and momentum of economic growth so that the growth target of 5.2 percent can be achieved. Ibrahim estimates that the rupiah will fluctuate but close lower on Monday, September 2, 2024, in the price range of IDR 15,440 - IDR 15,520 per US dollar.