Rupiah Potentially Weakens Driven by External and Internal Sentiments

Rupiah (Photo: Antara)

JAKARTA - The rupiah exchange rate on Thursday, October 24, 2024, is expected to weaken against the United States (US) dollar.

Quoting Bloomberg, the rupiah exchange rate on Wednesday, October 23, 2024, the rupiah exchange rate on the spot market closed down 0.38 percent at IDR 15,627 per US dollar. Meanwhile, the rupiah exchange rate at Bank Indonesia (BI) Jakarta Interbank Spot Dollar Rate (Jisdor) closed down 0.38 percent to IDR 15,620 per US dollar.

Director of PT Laba Forexindo Berjangka Ibrahim Assuaibi conveyed sentiments such as higher US yields; inflows of safe haven assets amid geopolitical tensions; and a relatively resilient US economy are expected to end soon, thus hampering the movement of the US dollar.

"Recent signs of resilience in the US economy have prompted increased bets that the Fed will cut interest rates by 25 basis points in November, down from the 50 bps cut seen in September. Traders are also seen pricing in higher terminal interest rates," he explained in his statement, quoted on Thursday, October 24.

In addition, there is ongoing tension in the Middle East, as Israel continues to launch attacks on Hamas and Hezbollah.

While US diplomats are seen trying to push for a ceasefire, there are still no signs of de-escalation in the conflict. Israel is also reportedly preparing a retaliatory attack on Iran.

From within the country, Ibrahim said that the International Monetary Fund or IMF projects that Indonesia's economic growth will still be 5.1 percent in 2029. Meanwhile, Indonesia's economic growth in 2024 is estimated to remain at 5.0 percent or stagnant from last year. This is stated in the October 2024 edition of the World Economic Outlook published by the IMF or International Monetary Fund.

In the report, the IMF projects that Indonesia's economic growth this year will reach 5.0 percent. As in previous years, it is estimated to remain at a 5 percent trend.

However, in the future, the estimated economic growth of Indonesia does not show a significant increase. For example, in 2025 it is estimated to only reach 5.1 percent. Even in 2029, Indonesia's economic growth will remain at 5.1 percent. As is known, 2029 will be the end of the term of office of President Prabowo Subianto and his vice president, Gibran Rakabuming Raka.

The IMF projection seems to indicate that Prabowo's ambitions are still difficult to achieve. Meanwhile, other indicators projected by the IMF are that Indonesia's inflation will be stable at 2.3 percent in 2024. Then, the current account balance in 2024 is estimated to be minus 1 percent and the unemployment rate in 2024 will be 5.2 percent.

Ibrahim estimates that the rupiah will fluctuate but close lower in trading on Thursday, October 24, 2024, in the price range of IDR 15,610 - IDR 15,720 per US dollar.