Businessicy – The Rupiah began the trading day on Wednesday with a decline against the US Dollar, as the market awaited key decisions from the Bank Indonesia (BI) Governor Board Meeting taking place today.
According to Antara, on Wednesday (August 21, 2024), the Rupiah opened weaker by 15 points, or approximately 0.10 percent, changing from 15,436 per US Dollar to 15,451 per US Dollar. This depreciation reflects market uncertainty regarding the monetary policy decisions of Bank Indonesia, especially amid speculation about the actions to be take in the coming months.
Since August 2022, Bank Indonesia has raised its benchmark interest rate by 275 basis points, from 3.5 percent to 6.25 percent. This tightening monetary policy was implement to control inflation and maintain Rupiah stability. However, with expectations of a potential easing of monetary policy in the United States, the market now hopes that BI might consider lowering interest rates to stimulate lending and economic growth.
A reduction in BI’s interest rates is viewed as a potential measure to strengthen the Rupiah against the US Dollar. Lower interest rates could encourage increased domestic borrowing and economic activity, which in turn may support Rupiah stability.
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In addition to domestic factors, movements in the US Dollar also play a crucial role in influencing the Rupiah’s exchange rate. Currently, the US Dollar is at its lowest point in seven months, driven by declining US Treasury yields and strong dovish speculation regarding Federal Reserve policies.
Global investors are closely watching for any announcements about potential Federal Reserve rate cuts in the near future, especially in the statement by Fed Chair Jerome Powell during the annual Jackson Hole symposium, starting Thursday. The Jackson Hole symposium is a key focus for the market as it may provide early signals about US monetary policy directions.
“Jerome Powell’s remarks at Jackson Hole will be highly significant as they could offer early indications of a potential Fed rate cut,” said Brahmantya.
Although the likelihood of a 50 basis point rate cut in September 2024 has diminished, market expectations still point towards gradual monetary easing, with projections suggesting a nearly 100 basis point reduction by the end of 2024.
Brahmantya added that today, the Rupiah is expected to fluctuate between Rp15,550 and Rp15,350 per US Dollar, depending on market sentiment and the decisions made by Bank Indonesia. The forthcoming decisions by Bank Indonesia will be crucial for maintaining Rupiah stability amidst global uncertainties and domestic economic dynamics.
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