Rupiah Potentially Strengthening Driven By Expectations For Cutting US Interest Rates

US and Rupiah dollars (Photo: dock. Antara)

JAKARTA - The rupiah exchange rate in trading Friday, December 13, 2024 is expected to move higher against the United States (US) dollar.

Quoting Bloomberg, the Rupiah exchange rate on Thursday, December 12, 2024, the rupiah exchange rate on the spot market closed down 0.16 percent at the level of Rp. 15,945 per US dollar. Meanwhile, the Jakarta Interbank Spot Dollar Rate (Jisdor) exchange rate of Bank Indonesia (BI) closed down 0.21 percent to a price level of Rp. 15,939 per US dollar.

Director of PT. Laba Forexindo Berjangka Ibrahim Assuaibi conveyed that the inflation data for the consumer price index is in line to increase the bet that the Fed will cut interest rates next week.

"The market estimates an opportunity of 98 percent for a 25-base point cut, according to the CME Fedwatch," he said in his statement, quoted Friday, December 13.

In addition, Ibrahim said traders prefer the US dollar amid growing doubts over the long-term prospects for inflation and interest rates.

Wednesday's CPI reading shows inflation at its strongest level in seven months a trend that is expected to make the Fed cautious over further monetary easing.

Ibrahim said the focus now is on the producer price index data to be released on Thursday, which comes days before the last Fed meeting for the year.

"The central bank's prospects for interest rates will be closely monitored, amid growing betting that the central bank will adopt a slower easing rate by 2025," he said.

Meanwhile, from within the country, the Government through the Minister of Finance reported that until the end of November 2024, the deficit in the State Revenue and Expenditure Budget (APBN) reached IDR 401.8 trillion or equivalent to 1.81 percent of GDP.

Although this figure shows a deficit, this achievement is still below the total deficit target set out in the 2024 apbn Law, which is IDR 522.8 trillion.

In the APBN. This revenue grew 1.3 percent compared to the same period last year (yoy). Despite the increase, the recovery of state revenues has not been fully stable, so the challenge to maintain a fiscal balance is still quite heavy.

In terms of spending, until the end of November 2024, the realization of state spending reached Rp2,894.5 trillion, or 87 percent of the budget ceiling in the APBN Law. This figure increased significantly by 15.3 percent compared to the same period last year (yoy).

This increase in spending reflects various spending pressures, including to support economic recovery and government priority programs. Sri Mulyani also highlighted positive achievements in primary balance, which still recorded a surplus of IDR 47.1 trillion.

The government will also continue to seek steps to maintain fiscal stability, including through more efficient spending management and increasing state revenues.

Ibrahim estimates that the rupiah will fluctuate but close higher in trading Friday, December 13, 2024, in the price range of IDR 15,880 - IDR 15,960 per US dollar.