Rupiah Strengthens Modestly, Supported by Weakening US Dollar and Foreign Reserves

Alvin Karunia By Alvin Karunia
4 Min Read
Rupiah Menguat Terbatas, Tertopang Pelemahan Dolar AS dan Cadangan Devisa
Rupiah Menguat Terbatas, Tertopang Pelemahan Dolar AS dan Cadangan Devisa

jlk – The exchange rate of the Indonesian Rupiah against the US Dollar strengthened modestly in today’s trading, Friday (3/8/2024), in line with the weakening US Dollar and the release of Indonesia’s foreign exchange reserves data.

Quoting Bloomberg data, the Rupiah closed at the level of Rp15,621 per US Dollar, representing a 0.21% increase compared to the previous closing at Rp15,655 per US Dollar. The Rupiah fluctuated in the range of Rp15,620 to Rp15,790 per US Dollar.

Meanwhile, the US Dollar index, which measures the strength of the US Dollar against six other major currencies, weakened by 0.07% to 103.18.

The weakening of the US Dollar is driven by market expectations that the US Federal Reserve (The Fed) will lower the benchmark interest rate in 2024.

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This sentiment arose after The Fed Chair Jerome Powell testified before the US Congress on Thursday (3/7/2024).

“Powell stated that The Fed is considering monetary easing in response to the impact of the coronavirus on the global economy.”

However, Powell provided little indication of the timing and scale of the planned interest rate cuts.

Powell also stated that the economic path and inflation in the US would determine The Fed’s monetary policy.

Additionally, the market is anticipating the release of US nonfarm payrolls data later today.

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This data will provide an overview of the US labor market conditions, a key consideration for The Fed in adjusting its interest rates.

Domestically, the Rupiah is also supported by Indonesia’s foreign exchange reserve data released by Bank Indonesia (BI) on Thursday (3/7/2024).

According to BI, Indonesia’s foreign exchange reserves at the end of February 2024 amounted to US$144 billion, slightly down from the end of January 2024 position of US$145.1 billion.

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The decline in foreign exchange reserves is influenced, among other factors, by the payment of the government’s foreign debt and the maturity of one of the foreign bonds, RI0224, in mid-February.

However, BI assesses that the foreign exchange reserve position is still sufficient to finance 6.5 months of imports and maintain the stability of the Rupiah exchange rate.

Ibrahim Assuaibi, Director of Laba Forexindo Berjangka, stated that the decline in foreign exchange reserves aligns with analysts’ expectations.

He added that the Rupiah still has room to strengthen further if the US nonfarm payrolls data disappoint the market.

“If US nonfarm payrolls data is weak, the US Dollar will weaken, and the Rupiah will strengthen. However, if US nonfarm payrolls data is strong, the US Dollar will strengthen, and the Rupiah will weaken,” said Ibrahim.

He predicts that the Rupiah will move in the range of Rp15,600 to Rp15,800 per US Dollar next week.

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