The rupiah weakened further to Rp13,000 against the US dollar yesterday, the lowest since July 1998 when the financial crisis hit the country. Year to date, the rupiah has fallen 4.6%.
Some market observers said the stronger dollar, supported by improving US economy, have affected the depreciation of other global currencies, the rupiah included.
Agus Martowardojo, governor of Bank Indonesia (central bank), told reporters that the current rupiah depreciation is still normal. He noted that the volatility of the rupiah is lower than that of global currencies.
“Our concern is about inflation. The deflation in 2 consecutive months (January-February 2015) means that our economy is still under control,” he explained.
President Joko “Jokowi” Widodo, meanwhile, hopes the rupiah’s correction would be temporary as the country’s economic fundamentals are improving.
The President noted that Indonesia’s foreign exchange reserves has reached US$114.3 billion with the trade balance that is also improving.
Market obervers believe that the government ought to do more to develop domestic economic fundamentals to minimizing the volatility or further correction of the rupiah against the greenback.
The external factors are beyond its control, but the government can manage inflation, maintain capital inflow, and improve fiscal conditions.
Sofyan Djalil, the coordinating minister for the economy, revealed that the government could not intervene with regards to the rupiah as the country had adopted the free regime of foreign exchange reserves.
“The rupiah’s movement is determined by the supply-demand factor,” Sofyan noted. The rupiah depreciation, however, will benefit export oriented businesses, whereas importers would be the ones to bear the negative impact.
Bambang Brodjonegoro, finance minister, admits that some market players have speculated that the rupiah will dip further as China’s economy slows down. China is a big importer of Indonesian products.
China lowered its 2015 economic growth target to “around seven percent” as authorities attempt to set the world’s second-largest economy on a more sustainable expansion path, AFP reported yesterday (March 5) morning.
By Yohannes Obor
Copying, redistributing, and retransmitting this article is a violation of copyrights law.
