DBS Bank senior economist Radhika Rao said that both US presidential candidates Donald Trump and Kamala Harris are trying to continue strengthening the value of the US dollar by implementing protectionism against China.
“Whoever wins, it looks like the dollar will still be quite strong. But maybe not as strong as it is now. Both candidates seem to still be negative or anti-China,” Radhika said in a discussion in Jakarta, Tuesday (6/8).
Radhika added that even though the Fed will aggressively cut interest rates in the future, Bank Indonesia is predicted to still be careful in lowering interest rates or the BI rate. The Bank Indonesia Board of Governors (RDG) Meeting on July 16-17, 2024 decided to maintain the benchmark interest rate or BI-Rate at 6.25%, the deposit facility interest rate or rupiah fund placement at 5.50%, and the lending facility interest rate or provision of rupiah funds remains at 7%.
“Maybe in terms of interest rate reduction in Indonesia it will not be as aggressive as in America. So, if America might reduce it twice or four times, maybe BI will not do that much,” he concluded.
On the same occasion, Equities Specialist DBS Group Research Maynard Arif revealed that market expectations regarding the Fed’s interest rate cut are predicted to weaken the US dollar. This has an impact on strengthening the currencies of developing countries, including Indonesia.
“With the Fed’s interest rate cut, we expect the dollar to weaken so that the rupiah strengthens. This year, the rupiah’s strengthening trend may still be in the range of Rp16 thousand per US dollar,” said Maynard.
He said, considering that the Fed will cut interest rates up to four times, it will make the rupiah strengthen more sharply to the level of Rp15 thousand per US dollar next year. (Z-11)
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