Rupiah Predicted to Weaken Haunted by Global Uncertainty

JAKARTA - The Rupiah exchange rate against the US dollar on Thursday 9 November 2023 is expected to weaken again due to global uncertainty.

Quoting Bloomberg, on the Rupiah exchange rate on Wednesday 8 November, the spot rupiah exchange rate weakened 0.09 percent to IDR 15,650 per US dollar. Meanwhile, the Jisdor rupiah exchange rate weakened 0.23 percent daily to a price level of IDR 15,629 per US dollar.

Ibrahim Assuaibi, Director of PT.Laba Forexindo Berjangka, said that the US central bank is signaling that US interest rates will remain higher for longer, most likely remaining above 5 percent until the end of 2024.

"Futures data from the CME FedWatch tool shows a 15 percent possibility of another interest rate increase in January 2024 and a 22% possibility of an interest rate cut in March 2024," he said in his statement, Thursday, November 9.

Ibrahim said that signs of continued economic weakness in China also made traders wary of regional markets. Data on Tuesday showed that China's exports fell more than expected.

Meanwhile, the country's trade balance shrank to its lowest level in 17 months in October. Focus now turns to China's inflation data, due on Thursday.

Ibrahim said that Bank Indonesia (BI) had raised the benchmark interest rate by 25 bps to 6 percent. This increase in interest rates will have an impact on various sectors ranging from property, insurance, to credit distributed by banks.

However, it is also important to understand that the increase in interest rates was carried out to strengthen the rupiah exchange rate stability policy from the impact of global uncertainty, as well as as a preemptive and forward-looking step to mitigate its impact on inflation in imported goods.

BI takes preemptive and forward-looking actions amidst global instability. BI wants to support the stability of the rupiah value amidst high volatility. This high volatility can be seen from the United States (US) bond yield figure which is currently at 5 percent, the highest since 2007, so BI can no longer hold interest rates.

Moreover, the weakening of the rupiah against the dollar in the past few months is still much better than the weakening that occurred. If you look at 2019-2020, it was much worse than what is happening now. In fact, the rupiah is a currency whose performance is quite well maintained compared to other currencies year to date.

Ibrahim estimates that the rupiah will fluctuate but close lower in trading on Thursday, November 9 in the price range of IDR 15,630- IDR 15,700 per US dollar.