Middle East Conflict Concerns Widespread Picu Weakening Of Rupiah

Rupiah and US dollars (Photo: intermediate)

JAKARTA - The rupiah exchange rate in trading Friday, October 4, 2024 is expected to weaken against the United States (US) dollar.

Quoting Bloomberg, the Rupiah exchange rate on Thursday, October 3, 2024, the rupiah exchange rate on the spot market closed down 0.88 percent at the level of Rp15,404 per US dollar. Meanwhile, the Jakarta Interbank Spot Dollar Rate (Jisdor) exchange rate closed lower by 0.96 percent to a price level of Rp15,394 per US dollar.

Director of PT Profit Forexindo Berjangka Ibrahim Assuaibi submitted a national labor report on ADP showing that the number of US private workers increased more than expected in September, ahead of much anticipated job data on Friday.

"The number of private workers increased by 143,000 last month after rising by 103,000 in August, the ADP National Manpower Report showed on Wednesday. Economists surveyed by Reuters have estimated an additional 120,000 jobs," he said in his statement, quoted Friday, October 4.

In addition, the prospect of a widespread Middle East conflict that could disrupt crude oil flows from key exporting areas overshadows the prospect of a stronger global supply.

Israel bombed Beirut city center in the early hours of Thursday, killing at least six people, after its troops experienced the deadliest day on the Lebanese front lines in a year of clashes against Iran-backed Hezbollah armed groups.

The attack came a day after Iran fired more than 180 ballistic missiles at Israel in an escalation of hostilities, which had seeped out of Israel and occupied Palestinian territories into Lebanon and Syria.

From a domestic perspective, Bank Indonesia (BI) provides a signal to open a space for further cutting the benchmark interest rate or BI Rate until the end of this year, along with low inflation conditions, stable rupiah exchange rates, and economic growth that need to be pushed continuously.

Then, BI will continue to pay close attention to economic developments, such as the United States (US) and Europe interest rate policies, and China's economic development.

BI cut the BI Rate at the Board of Governors Meeting (RDG) last September 2024 by 25 basis points (bps) to 6.00 percent. Meanwhile, the US interest rate or Fed Funds Rate (FFR) in September 2024 became 4.75 5.00 percent.

Previously, BI's decision to cut the benchmark interest rate or BI Rate would still continue. By the end of 2024, he predicts the BI-rate will be in the range of 5.50 percent.

As for August 2024, general inflation slightly decreased to 2.12 percentyear on year (yoy), down from 2.13 percent yoy in July 2024. This marks the lowest level since February 2022. However, this inflation level is still in the BI target range of 1.5 to 3.5 percent.

On the other hand, the momentum of lowering BI's benchmark interest rate is estimated to support economic growth to remain solid. Especially for the banking industry. The easing of BI's monetary policy is expected to encourage a decline in the cost of funds, which in turn will encourage a reduction in credit interest rates.

Ibrahim estimates that the rupiah will fluctuate but close lower in trading Friday, October 4, 2024, in the price range of IDR 15,410 - IDR 15,500 per US dollar.