Rupiah Potentially Strengthens, Market Waits For Various US Economic Data

Illustration (Photo: Doc Antara)

JAKARTA - The rupiah exchange rate in trading Thursday, September 5, 2024 is expected to move higher against the United States (US) dollar.

Quoting Bloomberg, the Rupiah exchange rate on Wednesday, September 4, 2024, the rupiah exchange rate on the spot market closed up 0.30 percent at the level of Rp. 15,480 per US dollar. Meanwhile, the Jakarta Interbank Spot Dollar Rate (Jisdor) exchange rate of Bank Indonesia (BI) closed higher by 0.43 percent to a price level of Rp. 15,490 per US dollar.

Director of PT Profit Forexindo Berjangka Ibrahim Assuaibi said investors are preparing for a week filled with important data, including reports of US payroll which will be released on Friday.

"This work report is expected to have a major impact on the Federal Reserve's decision, which will be released on September 18," he said in his statement, quoted Thursday, September 5.

Ibrahim said he anticipated this payroll data following comments from Fed Chairman Jerome Powell last month, signaling the start of a lower interest rate due to concerns about the weakening of the labor market.

The possibility of lowering interest rates at the Federal Reserve meeting became a focal point for investors.

According to the CME FedWatch tool, there is a 63 percent chance for a 25 basis point decline and 37 percent chance for a 50 basis point decline.

Overall, the market has taken into account a total of 100 basis points in lower interest rates throughout the year.

From the domestic side, the market responded positively to the August 2024 Inflation data, recorded 2.12 percent year on year (yoy), moving stably driven by the decline in most food prices.

However, the government is aware of the potential risk of the dry season which can have an impact on rice commodities.

Price inflation is regulated by the government, recorded an increase, which is 1.68 percent yoy driven by an increase in non-subsidized fuel and cigarettes prices.

Meanwhile, volatile price inflation continued its downward trend, recorded 3.04 percent yoy.

The decline in food prices was mainly driven by abundant supply along with the harvest period and decreased production costs such as corn feed.

Previously, the Indonesian Manufacturing Purchasing Managers' Index (PMI) in August 2024 was recorded at the level of 48.9.

This is inseparable from the decline in the performance of the global manufacturing sector amid pressure from demand.

The manufacturing activities of trading partner countries and ASEAN regions also experienced the same challenges, including the United States at 48.0 and Japan at 49.8.

Neighboring countries such as Malaysia and Australia also re-recorded manufacturing PMIs contracting at 49.7 and 48.5 levels, respectively.

In the midst of the slowdown in Indonesian PMI, optimism is still maintained with the performance of a number of industrial leadings in the country.

The pharmaceutical food and beverage and chemical industry until the second quarter consistently grew above 5 percent yoy.

In fact, the basic metal industry grew to 18.1 percent in line with the downstream process which increasingly showed results.

Ibrahim estimates that the rupiah will fluctuate but close higher in trading Thursday, September 5, 2024, in the price range of IDR 15,400 - IDR 15,520 per US dollar.