Market Anticipates Smaller US Interest Rate Cut, Rupiah Predicted to Strengthen

Illustration. (Photo: Doc. Antara)

JAKARTA - The rupiah exchange rate on Wednesday, November 6, 2024, is expected to strengthen against the United States (US) dollar.

Quoting Bloomberg, the rupiah exchange rate on Tuesday, November 9, 2024, the rupiah exchange rate on the spot market closed slightly up 0.03 percent at IDR 15,748 per US dollar. Meanwhile, the rupiah exchange rate at the Jakarta Interbank Spot Dollar Rate (Jisdor) Bank Indonesia (BI) closed down 0.09 percent to IDR 15,766 per US dollar.

Director of PT Laba Forexindo Berjangka Ibrahim Assuaibi said that traders were mostly still avoiding risk before the fiercely contested US presidential election later in the day, which weakened bets on deeper interest rate cuts by the Fed, making traders wary and impacting the strength 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 the 50 basis point cut made in September.

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

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

Meanwhile, domestically, Indonesia's economic growth in the third quarter of 2024 was recorded at 4.95 percent (YoY). For Indonesia's gross domestic product or GDP 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 consensus of economists compiled by Bloomberg produced a median value (median) of Indonesia's economic growth projection of 5 percent. Based on this projection, there is a chance that economic growth in the third quarter of 2024 will be lower than the previous quarter or the same period last year.

The weakness of the Indonesian economy is due to the absence of a driving moment such as National Religious Holidays (HBKN) as in 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 grew slowly in the third quarter of 2024 will have an impact on the contribution of GDP growth.

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