Rupiah Potential to Strengthen Amid Expectations of Lower US Inflation

Illustration (Photo: Doc Antara)

JAKARTA - The rupiah exchange rate on Thursday, September 12, 2024, is expected to strengthen against the United States (US) dollar.

Quoting Bloomberg, the rupiah exchange rate on Wednesday, September 11, 2024, the rupiah exchange rate on the spot market closed up 0.30 percent at IDR 15,402 per US dollar.

Meanwhile, the rupiah exchange rate at the Jakarta Interbank Spot Dollar Rate (Jisdor) Bank Indonesia (BI) closed up 0.20 percent to IDR 15,415 per US dollar.

Director of PT. Laba Forexindo Berjangka Ibrahim Assuaibi said the market was on alert ahead of the US consumer price index inflation reading to be released on Wednesday, which is widely expected to be a factor in the interest rate outlook.

"The reading is expected to show inflation declined slightly in August," he said in his statement, quoted on Thursday, September 12.

Ibrahim said the CPI data emerged just a week before the Federal Reserve meeting, where the central bank is expected to cut interest rates by at least 25 basis points.

Lowered expectations for a 50bps cut have rocked the stock market last week, amid some signs of resilience in the US economy.

Domestically, restrictions on subsidized fuel purchases that will be implemented on October 1, 2024 have made people nervous again, especially at a time when the middle class economy is continuing to decline, so it will be a burden for the Joko Widodo government.

Ibrahim said that what disappointed the market was that this information came from Bahlil Lahadala as Minister of Energy and Mineral Resources (ESDM), who confirmed that restrictions on the criteria for recipients of subsidized Pertalite and Solar fuels were planned to be implemented starting October 1, 2024 and currently the rules related to the criteria for users who are entitled to buy the two types of fuel are still being discussed by the government.

The restrictions on subsidized fuel that will be implemented starting October 1, 2024 were denied by the Head of the Presidential Communication Office (PCO) who confirmed that the government was still in the review stage regarding restrictions on subsidized fuel purchases.

As of now, there has been no decision regarding the implementation of the regulation on restrictions on the purchase of subsidized fuels such as Pertalite and Solar and until now the government has not held a further meeting that will discuss the discourse on restrictions on the criteria for recipients of subsidized fuels Pertalite and Solar which is planned to be implemented starting October 1, 2024.

Although there is a plan to hold the second Plenary Cabinet Session in the Indonesian Capital City (IKN) on Friday, September 13, 2024, there is no theme that will be determined to be discussed at the government table between Jokowi and his ministers.

Ibrahim estimates that the rupiah will fluctuate but close stronger in trading on Thursday, September 12, 2024 in the price range of IDR 15,340 - IDR 15,450 per US dollar.