Rupiah Potentially Weakens Driven By Middle East Conflict Concerns

Rupiah (photo: dock. Antara)

JAKARTA - The rupiah exchange rate in trading Thursday, October 3, 2024 is expected to weaken against the United States (US) dollar.

Quoting Bloomberg, the Rupiah exchange rate on Wednesday, October 2, 2024, the rupiah exchange rate on the spot market closed down 0.41 percent at the level of Rp. 15,268 per US dollar. Meanwhile, the Jakarta Interbank Spot Dollar Rate (Jisdor) exchange rate of Bank Indonesia (BI) closed lower by 0.28 percent to a price level of Rp. 15,247 per US dollar.

Director of PT. Laba Forexindo Berjangka Ibrahim Assuaibi expressed concern that the conflict in the Middle East could turn into a broader war after Iran fired ballistic missiles at Israel.

"Iran fired more than 180 ballistic missiles at Israel on Tuesday, Israel said, in retaliation for Israel's campaign against Tehran's Hezbollah allies in Lebanon," he said in a statement, quoted Thursday, October 3.

Israeli Prime Minister Benjamin Netanyahu promised Iran would pay for its missile attacks against Israel, while Tehran said any retaliation would be met with great destruction, raising fears of a wider war.

Meanwhile, US President Joe Biden expressed US full support for Israel, its longtime ally, and the UN Security Council scheduled a meeting in the Middle East on Wednesday.

In addition, the focus of the market is currently shifting to US private payroll data which will be released on Wednesday, with traders also wary of labor disputes at US ports.

From a domestic perspective, S&P Global reports that Indonesia's manufacturing Purchasing Manager's Index (PMI) is still contracting below 50, which is at 49.2 in September 2024, although the manufacturing activity index has experienced a slight increase from the previous month's 48.9.

The reduction in manufacturing conditions does not only occur in Indonesia, but also in other countries. Like China and Australia which are also included in the contraction zone. Countries in the Southeast Asia region that also collapsed. Vietnamese manufacturing PMI, for example, fell from 52 to 47. Not only Vietnam, several countries in Europe also experienced similar circumstances, although not as bad as Vietnam.

According to Ibrahim, although Indonesia's manufacturing PMI is still in the contraction zone, his condition is starting to improve. This shows that the optimism of domestic business actors began to grow compared to a few months ago.

"This shows that there is optimism among business actors that there is a lot of potential when manufacturing improves again," he said.

Ibrahim explained that the sluggishness of the Indonesian manufacturing sector was due to the sluggish global macroeconomic conditions in September, so the company certainly responded by reducing purchasing activities and choosing to use inventory to maintain the cost and efficiency of operation very strictly.

In the S&P Global report, it was explained that the operation in the economy of the Indonesian manufacturing sector was still at a decline rate in September which described a further decline in new outputs and demand.

Ibrahim estimates that the rupiah will fluctuate but close lower in trading Thursday, October 3, 2024, in the price range of IDR 15,250 - IDR 15,320 per US dollar.