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As rupiah hits 12,000 per dollar, BI says currency 'undervalued'
Bank Indonesia (BI) has moved to assuage market concerns over the steep depreciation of the rupiah, predicting that the âundervaluedâ currency would strengthen after it overshot the psychological threshold of 12,000 per US dollar on Thursday morning
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ankIndonesia (BI) has moved to assuage market concerns over the steep depreciationof the rupiah, predicting that the 'undervalued' currency would strengthen after itovershot the psychological threshold of 12,000 per US dollar on Thursday morning.
According to the Jakarta Interbank Spot Dollar Rate (JISDOR), the rupiah weakened 122 basis points during Thursday morning's trade to 12,030 per dollar, its weakest level since February.
'If [rupiah] volatility increases, BI will remain watchful of the market to offer an additional supply of dollars,' BI Senior Deputy Governor Mirza Adityaswara said via a text message on Thursday.
'The rupiah rate is currently undervalued,' he went on. 'The rupiah will grow stronger when the government introduces further policy measures to reduce fiscal and current-account deficits.'
Mirza attributed the currency's weakness to renewed risks in the external environment, after the US Federal Reserve signaled it would raise its interest rate to a higher level than that expected by market players; a situation that could reverse capital flows to the US and hurt emerging economies.
The US central bank's two-day policy meeting, which ended on Wednesday (Thursday, Jakarta time), concluded with Fed executives suggesting a faster pace of rate hikes, according to a policy statement released after the meeting.
