DIGIVESTASI - The Rupiah was observed to start weakening after China's manufacturing sector contracted and the US Dollar index (DXY) strengthened sharply, despite better-than-expected inflation in the country. 
According to Refinitiv, the Garuda coin at the end of trading yesterday, Tuesday (February 1, 2024), was at the level of IDR 15,465/US$, depreciating 0.45%. This is inversely proportional to the increase that occurred at the market close on Friday (December 29, 2023) of 0.13%.

Meanwhile, the DXY yesterday at 14:52 WIB rose 0.12% to 101.45. This figure is higher than Friday's close (December 29, 2023) at 101.33.

Meanwhile, the DXY yesterday at 14:52 WIB rose 0.12% to 101.45. The figure was higher than the market closing level on Friday (December 29, 2023), namely on Sunday (December 31, 2023), China announced the NBS manufacturing PMI index which showed the country fell back to 49th place in the first quarter. The December reading was lower than last month's reading of 49.4 and market expectations of 49.5.  

This contraction is the third consecutive month of factory activity impact and is the most pronounced pace in six months. This is due to the weak recovery from the weakening real estate market, deflationary risks, and rising global challenges. 

China's economic activity continued to slow down and negatively impacted imports and exports, including Indonesia's trade balance with China in general. In addition, the rupee exchange rate will experience strong pressure in 2023. On average, the rupee will reach Rp 15,255/US$ or higher than the macroeconomic assumption of the State Budget (APBN), which is Rp 14,800/US$. $.

"Our exchange rate of Rp 15,255/US$ is weaker than the assumption of Rp 14,800/US$," the Minister said. Sri Mulyani Indrawati during the APBN press conference at the Djuanda Building of the Ministry of Finance, Tuesday (February 1, 2024).gka 101.33.

One of the causes is the policy of the US central bank (Fed) which continues to tighten interest rates four times with a total of 100 basis points (bps). Therefore, the strength of the DXY encourages investors to invest in the United States rather than emerging markets such as Indonesia. In other words, there is a wave of capital withdrawal from Indonesia. 

Yesterday, the Central Bureau of Statistics (BPS) revealed that Indonesia's inflation rate in 2023 has decreased due to the weakening of the underlying inflation trend. We know that the inflation rate will be 2.61% year-on-year throughout 2023. This is the lowest inflation rate in the last 20 years. Meanwhile, the annual core component experienced inflation of 1.80% year-on-year according to BPS data which contributed 1.1% year-on-year. 

On the other hand, domestic sentiment towards economic growth in 2023 will also affect the movement of the country's currency. Indeed, Finance Minister Sri Mulyani Indrawati during a press conference on the realization of the 2023 State Budget said on Tuesday (1 February 2024) that the Indonesian economy is expected to grow by 5.05% in 2023.  

This growth rate will be lower than the state budget target of 5.3%. Last year, the failure to meet growth targets became a negative trend under the Joko Widodo (Jokowi) administration, which almost always missed development targets. During his 9-year tenure as Indonesia's leader (2015-2023), Jokowi only achieved his growth target in 2022. The growth base in 2021 can be said to be very low.

Rupiah Technical

Technically on an hourly basis, the rupee is moving sideways again after yesterday's weakness. Nearby, the rupee is likely to test its resistance at IDR/US$ 15,480, a position derived from the 200-hour moving average (MA200).

But in the event of a bigger reversal, market participants may be wary of the nearest support level at IDR 15,390. This position is obtained from the horizontal line based on the low of the candle tested on December 29, 2023.