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Still sluggish! When Will the Rupiah Be Back Against the US Dollar?

Still sluggish! When Will the Rupiah Be Back Against the US Dollar?

Andrianus.my.id - The rupiah exchange rate against the United States dollar continued to weaken until the close of trading yesterday,

Based on data from Bank Indonesia's Jakarta Interbank Spot Dollar Rate (Jisdor), the movement has also been perched at the level of Rp. 15,610 per US dollar, more depressed than the previous day's record at Rp. 15,564.

Senior Economist Chatib Basri admits that it is difficult to predict the fate of the rupiah exchange rate in the future. He said, the difficulty in predicting the direction of the rupiah's movement in the future would also be felt by other economists.

In economic theory, there is indeed a scheme known as exchange rate determination. But he points out in various empirical studies at Harvard and the University of California, Berkeley, that theory has not been proven to be able to 'predict' exchange rates precisely.

"That's why I often joke by saying, if an economist knows what the future exchange rate will be, he has a great sense of humor because he is most likely wrong," said Chatib as quoted from his Instagram account,

Even so, Chatib has a way to see the direction of the dollar's movement in the future to see the trend of the rupiah exchange rate. At least there are three factors which, according to Chatib, can explain how long the strengthening of the dollar will take.

The first factor is the difference in economic growth between the United States (US) and Europe. Chatib said, even though the US is experiencing a potential recession, its economic condition is relatively better compared to Europe. "That explains why the US Dollar strengthened against the Euro," he said.

The second factor is the tendency of the US to become a net export country for energy and commodities. That way, when energy and commodity prices increase, the trade balance will strengthen and result in the exchange rate also strengthening.

The third factor that can explain how long the dollar will strengthen is the efforts of the US central bank (The Fed) to overcome inflation by raising interest rates, returning capital to the US by itself, and the dollar exchange rate has increased.

"Those three factors at least determine whether this strong dollar phenomenon will continue to occur or not, we'll see," said Chatib.

As is known, the rupiah exchange rate weakened again against the United States (US) dollar at the start of trading Wednesday (16/11/2022). Even though the US Dollar Index fell again in trading last Tuesday.

According to Refinitiv data, the rupiah opened trade by weakening 0.1% to IDR 15,550/US$. The rupiah's depreciation increased to 0.23% to IDR 15,570/US$ at 9:03 WIB.

The third factor that strengthened the dollar was the efforts of the US central bank (The Fed) to overcome inflation by raising interest rates, returning capital to the US by itself, and the dollar exchange rate has increased.

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