Reversing Direction, Rupiah Strengthens Slightly to Rp16,251 This Afternoon

JAKARTA – Exchange rate (exchange rate) rupiah In today’s trading, it closed slightly higher by 7 points or 0.04 percent to Rp16,251 after previously being at Rp16,258 per USD. Based on Bloomberg data, the rupiah had opened at Rp16,305 per USD

Money market observer Ibrahim Assuaibi said the US dollar was influenced by weak data on the labor market, making traders bet that Powell would deliver a dovish statement during his two days of testimony before Congress, which will begin on Tuesday.

“Although Powell recently noted progress towards disinflation, he also said that the Fed still needs more confidence to start lowering interest rates,” Ibrahim wrote in his research, Tuesday (9/7/2024).

In addition to Powell, more Fed officials are due to speak this week. Key consumer price index inflation data is also due, and will likely factor into the Fed’s interest rate outlook.

Traders are now pricing in about a 76% chance of a rate cut at the Fed’s September meeting, up from 64% last week, according to the CME Group’s FedWatch Tool.

Sentiment toward China remains strained after the European Union imposed high tariffs on Chinese electric vehicle imports. Markets are watching for retaliation from Beijing, especially as officials have hinted at a possible trade war over tariffs.

Chinese stocks largely lagged their peers throughout June as optimism over the country’s economic recovery faded amid tepid economic readings.

This week’s focus is on trade and inflation readings from China for more clues on the country. From internal sentiment, the government expects the State Budget (APBN) deficit to widen to 2.7 percent of gross domestic product (GDP) or Rp609.7 trillion by the end of 2024.

The deficit projection is higher when compared to the initial target in the 2024 State Budget of IDR522.8 trillion or equivalent to 2.29 percent of GDP. The deficit is due to state spending which is estimated to soar to IDR3,412.2 trillion by the end of 2024, from the initial ceiling of IDR3,325.1 trillion. Meanwhile, state revenue is estimated to reach IDR2,802.5 trillion by the end of 2024, up slightly from the initial target of IDR2,802.3 trillion.

With these developments, the budget financing to cover the additional deficit is estimated at IDR609.7 trillion. Therefore, the government will add new debt to cover the deficit difference through the additional use of the surplus budget balance (SAL) of IDR100 trillion, not through new debt. However, through the issuance of government securities (SBN) until the end of 2024 will remain low.

Previously, the government in 2022 and 2023 was able to collect a fairly large surplus budget balance (SAL) so that it could be utilized at this time, amidst the global interest rate conditions that tend to be high. Based on the data above, the rupiah currency for the next trade is predicted to move fluctuatively, but closed again weaker in the range of Rp16,270 – Rp16,330.

(nng)