Rupiah’s Movement Friday, October 27 Still Shadowed by US and Middle East Sentiment

JAKARTA - The rupiah exchange rate still has the potential to weaken on Friday 27 October 2023 due to the strengthening of the US dollar and concerns about the potential escalation of the Israel-Hamas war.

For information, based on Bloomberg data, the rupiah further weakened 0.31 percent to IDR 15,919 per US dollar in trading Thursday, October 26, 2023.

Furthermore, at Bank Indonesia's Jakarta Interbank Spot Dollar Rate (JISDOR) reference rate, the rupiah exchange rate was at IDR 15,933, weakening from IDR 15,871 on the previous trading day.

Ibrahim Assuaibi, Director of PT.Laba Forexindo Berjangka, said that concerns about the potential escalation of the Israel-Hamas war still persist as missile attacks on Gaza continue, while Israel reaffirms its commitment to carrying out ground attacks in the region.

"Higher US interest rates are driving up the dollar and Treasury yields. While signs of strength in the US economy are expected to increase risk appetite, they are also expected to provide room for the Federal Reserve to keep interest rates higher for longer," he explained, Friday, October 27.

Ibrahim said in Asia, Traders are trying to measure how big an economic boom will be generated by China's planned government bond issuance of 1 trillion yuan or 136 billion US dollars. The currency is still under pressure due to doubts over economic recovery, as well as the crisis in the property market.

Apart from that, market players continue to monitor the war between Israel and Hamas.

This is starting to have an impact on world oil prices which continue to creep up.

Global risks and uncertainty are increasing, Ibrahim said, this could have a spillover impact within the country which could affect the exchange rate, inflation, and economic growth.

Ibrahim said that in 2022 due to the war between Russia and Ukraine, oil prices would jump to 128 US dollars per barrel, from 60-70 US dollars per barrel.

"Currently, oil prices, which had previously fallen, have risen again to more than 90 US dollars per barrel," he explained

According to Ibrahim, with the war in Palestine, which is the Middle East zone and the world's largest oil and gas production zone, the turmoil has begun to be reflected.

"After the oil price fell, it was around 80 US dollars per barrel again, now it has soared and reached 90 US dollars. This is a level not only of supply demand, but psychology because of the war," he said

Apart from that, regarding gas prices, the movement is still minus 29.6 percent year to date (ytd).

Then, coal has decreased quite significantly - 63.6 percent.

This has a significant impact on the APBN because coal contributes taxes and PNBP, even export duties if they are implemented.

Ibrahim estimates that the rupiah will fluctuate but close lower on trading Friday, October 27 in the price range of IDR 15,910-IDR 15,970 per US dollar.