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.
Business feels the pinch as rupiah falls further
Policy makers and industry representatives have called on Bank Indonesia (BI) to take a more active approach in stabilizing the rupiah, as businesses struggle to cope with its fitful performance
Change Size
P
olicy makers and industry representatives have called on Bank Indonesia (BI) to take a more active approach in stabilizing the rupiah, as businesses struggle to cope with its fitful performance.
Trade Minister Muhammad Lutfi said Thursday that the recent sharp depreciation might not necessarily translate into a boon for exporters, who are supposedly enjoying the greatest benefit from the weak currency.
He explained that importers suffered as they had to pay more for offshore-based products.
'The fact that [the currency] has been erratic has made it difficult for exporters and importers,' Lutfi told reporters on Thursday. 'Exchange rate stability and predictability is really important.'
Businesses and investors were taken aback by the rupiah's latest sharp fluctuation after the currency turned from Asia's best performer to its worst in just a matter of weeks.
On Thursday, the rupiah fell 0.5 percent to 12,091 against the greenback, according to the Jakarta Interbank Spot Dollar Rate (JISDOR). The currency had already fallen by 6 percent in April-June, overturning its 7 percent appreciation in the first quarter, which had made it the best performer among Asian currencies during that period.
The central bank was also under the spotlight for the rupiah's volatility. Its one-month implied volatility, the expected swings in the exchange rate, jumped to 10.1 percent this week from a mere 7.5 percent on June 13, according to Reuters.
'We are facing uncertainty with the rupiah's movements, as we have to recalculate our base costs and selling prices,' Sofjan Wanandi, the chairman of the Indonesian Employers Association (Apindo), said in a phone interview.
Sofjan argued, in response to rupiah's depreciation, businesses could not just raise prices for imported goods as overall economic demand was subdued. 'Actually, the rupiah rate of 11,500 per dollar was conducive for us,' he added.
Investment Coordinating Board (BKPM) chairman Mahendra Siregar on Thursday warned that the rupiah's steep fall might be 'problematic' for businesses looking to borrow dollars to expand investment.
The latest statistics from BI shows that Indonesia's private sector dollar-denominated debts saw a 13 percent increase year-on-year to US$145.6 billion in April.
The debt growth was higher than the 12.2 percent and 11.6 percent recorded in March and February, respectively, ringing alarm bells for policy makers over potential currency mismatch in the private sector if the rupiah continued to depreciate.
Responding to the rupiah's recent weakness, BI senior deputy governor Mirza Adityaswara said Thursday that the central bank would continue to guard stability.
However, Mirza argued that the market might have overreacted over recent domestic economic and political developments, as the current rupiah rate of 12,000 per dollar had 'overshot' BI's comfortable range of 11,600 to 11,800.
Finance Minister Chatib Basri said last week that the government would set the rupiah assumption in next year's budget between 11,500 and 12,000, on the back of the prospect of tighter global liquidity driven by an expected increase in US interest rates.
The central bank has predicted the US Federal Reserve fund rate ' the benchmark interest rate in the US economy, which currently stands at a mere 0.25 percent ' would increase by 50 basis points in the third quarter next year and by another 25 basis points in the fourth quarter.
The higher interest rate in the US could reduce the inflow of short-term funds to emerging markets including Indonesia.
