Jakarta. The rupiah is projected to strengthen in the latter half of 2024, reaching its fundamental level of Rp 15,000. This aligns with Bank Indonesia's anticipation of a reduction in the benchmark interest rate by the US Federal Reserve.

"The rupiah has experienced fluctuations, but there is confidence that it will appreciate towards its fundamentals in the second semester. Efforts will be made to maintain rupiah stability, and it is anticipated to strengthen," said BI Governor Perry Warjiyo on Wednesday.

On Wednesday, the rupiah was traded at Rp 15,775 per dollar, marking a 5 percent depreciation compared to the same day last year.

BI anticipates a reduction in the Federal Reserve's interest rate in the second half of 2024.

"We estimate it might be in the second semester. God willing, it (rupiah) will ease after the Federal Fund Rate (FFR) goes down," said Perry.

Efforts to stabilize the rupiah exchange rate involve the implementation of a pro-market monetary policy through market mechanisms. BI is also collaborating with money market association institutions to deepen the financial market.

"We will continue to strengthen the mix of pro-stability monetary policies while observing opportunities in the second semester, whether there are possibilities of interest rate cuts and stabilizing the exchange rate," added Perry.

Previously, Finance Minister Sri Mulyani Indrawati predicted the rupiah exchange rate would remain stable with a tendency to strengthen, supported by the easing global uncertainty, the decreasing trend of yields on bonds in major developed countries, and the diminishing pressure for the appreciation of the US dollar. 

As of the end of December 2023, the rupiah's point-to-point exchange rate has strengthened by 1.11 percent year on year compared to the end of the previous year. This performance outperforms the Thai Baht and the Philippine Peso, which only strengthened by 0.76 percent and 0.62 percent year on year, respectively.

"Rupiah's appreciation is also supported by BI's stabilization policies and the resurgence of foreign portfolio inflows, in line with domestic financial asset yields and the positive economic outlook for Indonesia," said Sri Mulyani.