Rupiah Potentially Continuing Weakening Driven By US Interest Rate Cuts

Rupiah and US Dollars (Photo: Antara)

JAKARTA - The rupiah exchange rate in trading Tuesday, January 14, 2025 is expected to weaken against the United States (US) dollar.

Quoting Bloomberg, on Monday, January 13, 2025, the rupiah spot exchange rate closed down 0.57 percent to the level of Rp. 16,283 per US dollar. Meanwhile, the Jakarta Interbank Spot Dollar Rate (Jisdor) exchange rate of Bank Indonesia (BI) closed down 0.53 percent to a price level of Rp. 16,281 per US dollar.

Director of PT Laba Forexindo Berjangka Ibrahim Assuaibi said the focus now is on the upcoming US inflation data, which will be released on Wednesday, for further signaling on Fed interest rate prospects.

Ibrahim estimates that the rupiah will fluctuate but close lower in trading on Tuesday, January 14, 2025, in the price range of IDR 16,270 - IDR 16,350 per US dollar.

"The central bank hints that strong inflation and power in the labor market will give him more encouragement to maintain high interest rates," he said in a statement, quoted Tuesday, January 14.

Additionally, Goldman Sachs analysts said in a recent note that they now expect the Fed to cut interest rates just twice this year, compared to previous expectations about three cuts. The central bank terminal interest rate is also expected to be higher in this easing cycle.

Meanwhile, from within the country, Bank Indonesia (BI) released retail or retail sales data which experienced a slight increase in December 2024, the main cause of the expansion of the retail industry in Indonesia until the end of 2024.

The annual increase in IPR in December 2024 comes from the spare parts and accessories group, as well as food, beverages and tobacco.

On a monthly basis, retail sales are predicted to accelerate with growth of 5.1 percent (mtm) after contracting by 0.4 percent (mtm) in the previous month.

The group with the highest growth is the clothing subgroup, followed by food, beverage, and tobacco groups, as well as spare parts and accessories. This is in line with the increasing demand from the public ahead of the celebration of the national religious holidays (HBKN) for Christmas and New Year.

In November 2024, IPR was recorded at 209.7 or an annual growth of 0.9 percent (yoy), lower than the growth in October 2024 of 1.5 percent (yoy). Growth in November 2024 was mainly driven by the fuel group of motorized vehicles, spare parts and accessories, as well as food, beverages, and tobacco.

Meanwhile, monthly, retail sales in November 2024 contracted 0.4 percent (mtm), after recording a contraction of 0.01 percent (mtm) in the previous month. The majority of groups experienced contractions, especially in groups of cultural and recreational goods, spare parts and accessories as well as food, beverages, and tobacco.

This was due to a decrease in public demand due to weather factors that restrained community activities. Meanwhile, the group that is recorded to be still growing and supporting retail sales performance is information and communication equipment as well as motor vehicle fuel.