To note, quoting Bloomberg, on Monday, January 19, the spot rupiah exchange rate closed down 0.40 percent to Rp16,955 per US dollar.
Meanwhile, the Jakarta Interbank Spot Dollar Rate (Jisdor) exchange rate of the Bank Indonesia (BI) closed down 0.33 percent to the price level of IDR16,935 per US dollar.
Money market observer Ibrahim Assuaibi explained that from the external side, the United States economic data showed that the labor market conditions were still quite solid.
He said this situation raises doubts among market participants about the Federal Reserve's plan to cut interest rates twice this year.
"Fed funds futures are now pricing in a delay of the next rate cut to June and September from the previous forecast in January and April," he said in a statement, Monday, January 19.
According to him, this strengthens the view that the US central bank has the potential to maintain high interest rates for a longer period of time.
Meanwhile, from the Asian region, Ibrahim said the data released on Monday showed that China's economy grew by 5.0 percent throughout last year and this achievement was in line with the government's target, driven by an increase in global demand for Chinese goods that reached a record high, to cover the weakness of domestic consumption.
Meanwhile, from within the country, Ibrahim said that to support President Prabowo Subianto's economic growth target of 8 percent in 2029, the government plans to implement a number of relatively unconventional policies.
According to him, this policy has the potential to increase medium-term risks and trigger additional negative sentiment against the rupiah.
In addition, he conveyed concerns that Indonesia's fiscal condition had resurfaced after on January 8, 2026 it was revealed that the previous year's budget deficit was close to the maximum limit set by law, namely 3 percent.
On the other hand, Ibrahim said that state revenue was still relatively weak, adding pressure on the rupiah movement.
"Although, Bank Indonesia has intervened to control volatility, there are quite a few limitations from the policy side," he explained.
However, BI is actively stabilizing the rupiah through the Domestic Non-Deliverable Forward (DNDF) market and the NDF market. However, the central bank's tolerance for moderate rupiah weakening is considered to reduce the effectiveness of these intervention measures.
Ibrahim said that to maintain the stability of the rupiah, BI is expected to maintain the benchmark interest rate in the policy meeting held on Wednesday.
According to him, the central bank has also optimized various instruments, such as regulating the issuance of BI securities, intervening in the foreign exchange market, and purchasing government bonds in the secondary market.
"In addition, the government's plan to tighten the management of foreign exchange from exports is considered to provide support for the rupiah. However, analysts still voice concern that this year's fiscal deficit has the potential to widen beyond the legal limit of 3 percent, as the government tries to increase spending amid weak tax revenue," he concluded.
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