Weakly Potential Rupiah Driven By Fed Rate Revenue Expetition

US and Rupiah dollars (Photo: dock. Antara)

JAKARTA - The rupiah exchange rate in trading Wednesday, October 2, 2024 is expected to weaken against the United States (US) dollar.

Quoting Bloomberg, the Rupiah exchange rate on Tuesday, October 1, 2024, the rupiah exchange rate on the spot market closed down 0.44 percent at the level of Rp. 15,206 per US dollar. Meanwhile, the Jakarta Interbank Spot Dollar Rate (Jisdor) exchange rate of Bank Indonesia (BI) closed lower by 0.39 percent to a price level of Rp. 15,204 per US dollar.

Director of PT Profit Forexindo Berjangka Ibrahim Assuaibi said Federal Reserve Chairman Jerome Powell refused to bet on a larger cut in interest rates.

"Powell adopted a more aggressive tone in his speech at a conference in Tennessee, saying that the US central bank is likely to maintain a quarter-point interest rate cut in the future," he said in a statement, quoted Wednesday, October 2.

In addition, traders remain confident that the Fed will cut again at its next policy-setting meeting in November, but cut expectations for a 50-base point (bps) reduction to 35.4 percent from 53.3 percent the day before, according to CME Group's FedWatch Tool.

According to Ibrahim, Powell's speech was delivered ahead of a series of solid US data this week, including the Institute for Supply Management manufacturing index which will be released Tuesday night and a non-manufacturing report on Thursday, followed by a potentially crucial monthly job figure on Friday.

Meanwhile, tensions in the Middle East remain of concern, Israel's long-expected ground invasion of Lebanon appears to have started on Tuesday as its military says troops have started a "limited" attack on Hezbollah's targets in border areas.

The attack follows the head assassination of Hezbollah Hassan Nasrallah by Israel on Friday, and is an escalating conflict in the Middle East between Israel and Iran-backed militants who now threaten to drag the US and Iran.

From the domestic side, Indonesia's inflation rate in September 2024 reached 1.84 percent on an annual basis (year on year / YoY). However, there was a monthly deflation of 0.12 percent (month to month / MtM) which caused Indonesia to experience five consecutive months of deflation. The consumer price index (IHK) fell to the level of 105.93 in September 2024, from 106.06 in August 2024.

The expenditure group that contributes to the largest monthly deflation is food and beverages, with deflation of 0.59 percent and contributing deflation of 0.17 percent. Meanwhile, there are commodities with an inflationary contribution, including fresh fish and powdered coffee components, with a contribution of 0.02 percent each. Other inflation-producing components are college academy tuition fees, as well as machine kretek cigarettes.

Previously, based on analysts' projections, it estimated that on an annual basis inflation in Indonesia would subside. Of the 29 economists, the central value of the projection of inflation in September 2024 was 2.00 percent (YoY), down from the position in August 2024 with inflation 2.12 percent (YoY).

The lowest projected annual inflation in September 2024 is 1.80 percent, while the highest is 2.20 percent. It is recorded that 20 economists project that annual inflation in September 2024 will be lower than the previous month. However, the conditions are different when viewed from the JCI movement on a monthly basis. Economists estimate that there will still be monthly deflation in September 2024.

Ibrahim estimates that the rupiah will fluctuate but closed lower in trading Wednesday, October 2, 2024, in the price range of IDR 15,130 - IDR 15,240 per US dollar.