TheJakartaPost
Please Update your browser
Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.
Despite plunge, rupiah still within BI's tolerable level: Agus
Bank Indonesia (BI) has dismissed concern over the possibility of a steep decline in the rupiah against the US dollar in the coming months after the currency unexpectedly sharply declined in the last two days
Change Size
Bank Indonesia (BI) has dismissed concern over the possibility of a steep decline in the rupiah against the US dollar in the coming months after the currency unexpectedly sharply declined in the last two days.
BI Governor Agus Martowardojo said in Jakarta on Tuesday that despite the sharp decline in the last two days, the currency was still within 'the tolerable level'. The central bank had forecast the rupiah to trade between 11,600 to 11,800 against the greenback throughout this year, he added.
'The rupiah is somewhat affected by sentimental factors on political developments in Indonesia,' Agus said.
'On the fundamental side, our current account position and fuel subsidy issue also affected [the rupiah value], in addition to global factors such as the slowdown in China and the normalization of the US stimulus,' he explained.
On Tuesday, the rupiah further fell 0.6 percent to touch 11,806 per dollar from 11,740, taking the currency's loss in two days to 195 basis points, according to the Jakarta Interbank Spot Dollar Rate (JISDOR).
The rupiah has appreciated 3.1 percent in the year-to-date, still among the strongest performers in the region, but far below its 7 percent appreciation recorded in the first three months of this year.
The rupiah faced heavy pressure this week following the announcement that Indonesia's trade balance recorded a US$1.9 billion deficit, with the export-import gap previously being in the surplus for two consecutive months.
The deficit was a surprise among economists, including those from state-run Mandiri Sekuritas who initially predicted a deficit of only $400 million.
The market consensus' estimate was a $178 million surplus, according to a Bloomberg survey.
The larger-than-expected trade deficit might weigh on the current account, the broadest measurement of a country's international trade that has become a major worry among foreign investors to Indonesia.
The widening current account deficit will in turn weaken the rupiah's fundamental value, as dollar demand for imports will exceed the dollar supply that the country can obtain from export earnings.
The country's current account deficit may widen to 3.5 percent of gross domestic product (GDP) in the second quarter this year, compared to 2.1 percent in the first quarter, according to Chua Hak Bin, an economist with Bank of America Merrill Lynch.
'The deterioration is coming from the trade deficit as well as the seasonal increase in dividend and interest payments in the second quarter,' he wrote in a research note. 'Fuel subsidies are also staying in place this year, with the oil-trade deficit likely to worsen.'
Maybank currency strategist Saktiandi Supaat said that there could be 'choppy trades' ahead for the rupiah due to monetary policy developments in Europe and the US, but argued that the currency's deprecation over the past two days might be a knee-jerk reaction that was not supported by the fundamentals.
'We cannot discount a move to the 12,000-level, but possible interventions by the central bank are likely to cap upside,' he wrote in an email on Tuesday.
Every 100 basis points of rupiah depreciation will add at least $300 million to the fiscal burden, as the weak currency will drive up the cost of oil imports and enlarge fuel subsidies, according to calculations from Finance Minister Chatib Basri.
Meanwhile, the yield on Indonesia's 8.375 percent notes due in March 2024 fell four basis points, or 0.04 percentage points, to 8.02 percent, the lowest since May 22, according to the Inter Dealer Market Association.
