The Market For Anticipating Smaller US Interest Rate Cuts, Rupiah Is Predicted To Strengthen

Illustration. (Photo: Doc. Antara)

JAKARTA - The rupiah exchange rate in trading Wednesday, November 6, 2024 is expected to move higher against the United States (US) dollar.

Quoting Bloomberg, the Rupiah exchange rate on Tuesday, November 9, 2024, the rupiah exchange rate in the spot market closed slightly up 0.03 percent at the level of Rp. 15,748 per US dollar. Meanwhile, the Jakarta Interbank Spot Dollar Rate (Jisdor) exchange rate closed lower by 0.09 percent to a price level of Rp. 15,766 per US dollar.

Director of PT Profit Forexindo Berjangka Ibrahim Assuaibi said traders remained largely risk-avoiding before the fiercely contested US presidential election in the future, which weakens bets on Fed's deeper interest rate cuts, alerting traders and impacting the superiority of the US dollar index.

In addition, at this week's Federal Reserve meeting, the Fed is expected to cut interest rates by 25 basis points, smaller than a 50-base point cut conducted in September.

"However, the prospect of future cuts will be closely monitored, especially as the latest data shows the strength of the US economy and high inflation," he said in a statement quoted on Wednesday, November 6.

Previously, non-farm payroll data from Friday also showed a slight decline in the trend labor market which gave the Fed more encouragement to continue to cut interest rates.

Meanwhile, from within the country, Indonesia's economic growth in the third quarter of 2024 was recorded at 4.95 percent (YoY). For gross domestic product or GDP Indonesia at current prices in the third quarter of 2024, it reached IDR 5,638.9 trillion. Meanwhile, GDP based on constant prices reached IDR 3,279.6 trillion.

Indonesia's economic growth in the third quarter of 2024 grew 4.95 percent from the movement in the second quarter of 2024. However, in the second quarter of 2024, economic growth was still higher, namely 5.05 percent (YoY). When compared to the second quarter of 2024, it grew 1.50 percent (QtQ).

Previously, the economic consensus compiled by Bloomberg produced a central value (median) projected Indonesia's economic growth of 5 percent. Based on this projection, there are opportunities for economic growth in the third quarter of 2024 lower than the previous quarter and the same period last year.

The weakness of Indonesia's economy is due to no driving moment such as National Religious Holidays (HBKN) like the first and second quarters of this year. As a result, public consumption has the potential to be lower. On the other hand, investment that grows slowly in the third quarter of 2024 will have an impact on GDP's growth contribution.

Ibrahim estimates that the rupiah will fluctuate but close higher in trading on Wednesday, November 6, 2024, in the price range of IDR 15,640 - IDR 15,750 per US dollar.