Despite a Slight Strengthening, the Rupiah Remains Shadowed by Weakening Ahead of the Eid al-Fitr Holiday

Katadata reported that the Indonesian Rupiah (IDR) strengthened slightly by 0.17% to 15,892 per US dollar (USD) at the opening of trading this morning, Friday, April 5, 2024.

Data at 2 PM WIB on Friday afternoon showed the Rupiah at 15,850 per USD. This is lower than the previous day's achievement of 15,907 on April 4, 2024. The Rupiah has actually been consistently rising since March 21, 2024, as seen in the graph.

Money market analyst Lukman Leong said the Rupiah is expected to weaken against the USD. The strengthening occurred after statements from US Federal Reserve officials Neel Kashkari and Thomas Barkin.

"The US dollar rebounded after hawkish statements from Fed officials Kashkari and Barkin," Lukman told Katadata.co.id on Friday (5/4/2024).

However, Lukman said the Rupiah's weakening is likely to be limited. Market players are currently awaiting Indonesian foreign exchange reserve data.

"However, the weakening will be limited; investors are awaiting Indonesia's foreign exchange reserve data," he said. The Rupiah is expected to move in the range of 15,850-16,000.

Money market observer Ariston Tjendra believes the Rupiah has the potential to weaken against the USD ahead of the long holiday today. With significant pressure on risky assets, the market may be reluctant to hold Rupiah assets during the market holiday.

"Some Asian stock indices, which are risky assets, are seen under pressure this morning," said Ariston.

According to Bloomberg, the majority of Asian currencies are still showing weakness against the USD. The Thai Baht weakened by 0.16%, the Malaysian Ringgit by 0.08%, the Chinese Yuan by 0.01%, the Indian Rupee strengthened by 0.01%, the Philippine Peso weakened by 0.27%, and the Singapore Dollar weakened by 0.10%.

(Read Katadata: [Rupiah Strengthens to 15,892 per US Dollar Ahead of Eid al-Fitr Holiday](https://katadata.co.id/finansial/makro/660f659134a88/rupiah-menguat-15892-per-dolar-as-jelang-libur-lebaran))

Burdening Businesses

The Indonesian Employers Association (Apindo) estimates that the Rupiah's weakening over the past two weeks towards the level of Rp 16,000 per USD has the potential to trigger price increases in the second quarter of this year. The Rupiah's weakening could also disrupt industrial competitiveness and even lead to layoffs.

"Increases in overhead production costs can occur if the Rupiah's weakening is allowed to continue for too long," said Apindo Chairman Shinta W. Kamdani to Katadata.co.id on Thursday (4/4/2024).

Shinta explained that the increase in production costs is due to the fact that most raw materials for the domestic manufacturing sector still rely on imports.

(Read Katadata: [Businesses Explain the Impact if the Rupiah Continues to Weaken and Breaks Through 16,000/US$](https://katadata.co.id/berita/industri/660e62626d2fd/pengusaha-beberkan-dampak-jika-rupiah-terus-loyo-tembus-16000us))

The Indonesian Food and Beverage Producers Association (Gappmi) also sees the current Rupiah weakening as burdensome, especially for micro and small-scale companies. Medium and large-scale companies will also face difficulties if the Rupiah breaks through Rp 16,000 per USD.

Gappmi Chairman Adhi S. Lukman said that micro and small-scale industries, especially in processed food, generally supply raw materials on a daily or weekly basis. At the same time, Adhi believes that the processed food industry is quite dependent on imported raw materials.

"These small industries are quite vulnerable to the Rupiah's weakening, so they usually raise their selling prices or reduce the size of their products," Adhi told Katadata.co.id on Friday (5/4/2024).

(Read Katadata: [Small-Scale Food Businesses Most Affected if Rupiah Falls](https://katadata.co.id/berita/industri/660f88f5b9a05/pelaku-usaha-makanan-skala-kecil-paling-terdampak-jika-rupiah-jatuh))

Adhi explained that medium and large-scale processed food industries are not too affected by the current Rupiah weakening. This is due to the long-term raw material supply contracts typically held by these larger industries.

Adhi believes that medium and large industries will begin to be impacted if the exchange rate breaks through Rp 16,000 per US dollar. Meanwhile, the impact on these larger industries will be significant if the Rupiah reaches Rp 16,500 per US dollar.

(See also: [BI Holds Reference Interest Rate at 6% in March 2024](https://databoks.katadata.co.id/datapublish/2024/03/20/bi-tahan-suku-bunga-acuan-6-pada-maret-2024))