Rupiah Is Predicted To Strengthen Driven By Internal Sentiment

Rupiah (Photo: Antara)

JAKARTA - The rupiah exchange rate in trading Tuesday, January 7, 2025 is expected to move higher against the United States (US) dollar.

Quoting Bloomberg, on Monday, January 6, 2025, the rupiah spot exchange rate closed down 0.01 percent to the level of Rp. 16,198 per US dollar. Meanwhile, the Jakarta Interbank Spot Dollar Rate (Jisdor) exchange rate of Bank Indonesia (BI) closed up 0.14 percent to a price level of Rp. 16,193 per US dollar.

Director of PT Profit Forexindo Berjangka Ibrahim Assuaibi said amid growing concerns that US interest rates will fall later this year.

"The Federal Reserve has warned in December that sluggish inflation and power in the labor market will keep interest rates high for a longer time, with the latest comments from Fed officials supporting this idea," he said in a statement, quoted Tuesday, January 7.

Governor Adriana Kugler and Fed San Francisco President Mary Daly said that the central bank has yet to declare victory over inflation and observe a thorough labor market for signs of weakening.

Ibrahim conveyed that sluggish inflation and a strong labor market made Fed less eager to cut interest rates. The focus this week is on data on upcoming non-farm payroll for further signalling about interest rates.

Meanwhile, from within the country, the Market continues to observe the State Revenue and Expenditure Budget or the 2024 State Budget recording a deficit of IDR 507.8 trillion or equivalent to 2.29 percent of gross domestic product (GDP). The deficit is wide from the previous year's achievement or 2023, which is IDR 347.6 trillion or 1.65 percent of GDP.

Overall, the 2024 State Budget is designed to be 2.29 percent of GDP. This means that the government has predicted that the 2024 State Budget deficit will be greater than 2023. The government had estimated that the 2024 State Budget deficit would widen to 2.7 percent, due to the severe macroeconomic condition in the first semester of 2024.

The initial target of the state budget deficit is IDR 522.8 trillion. Previously, the Minister of Finance and the House of Representatives also agreed on a deficit of IDR 609.7 trillion. This figure is equivalent to 2.70 percent of GDP.

Meanwhile, state revenue in 2024 has reached Rp2,842.5 trillion, an increase of 2.1 percent on an annual basis (yoy) compared to 2023. State revenue in 2024 comes from tax revenues of Rp1,932.4 trillion, customs and excise of Rp300.2 trillion, Non-Tax State Revenue (PNBP) of Rp579.5 trillion, and grants of Rp30.3 trillion.

Ibrahim conveyed that the pressure on food prices due to El hygiena, high oil prices, and the slowdown in China's economy affected the economic prospects of Indonesia and the state budget.

However, Ibrahim said that as oil price pressure eased, rising commodity prices such as coal and CPO, until China's fiscal and monetary stimulus made economic conditions improve, so that the state budget deficit could return to its original design.

Ibrahim estimates that the rupiah will fluctuate but close higher on trading Tuesday, January 7, 2025, in the price range of IDR 16,150 - IDR 16,210 per US dollar.