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Rupiah's fundemental value at 12,000: Minister
Finance Minister Chatib Basri said the current rate of Rp 12,000 per US dollar has become the fundamental value of the currency, making it difficult to return to the previous level of Rp 11,700 to Rp 11,800 per US dollar
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inance Minister Chatib Basri said the current rate of Rp 12,000 per US dollar has become the fundamental value of the currency, making it difficult to return to the previous level of Rp 11,700 to Rp 11,800 per US dollar.
Bank Indonesia's (BI) mid-rate data showed that the rupiah was traded at 12,144 per US dollar, down from 12,136 per US dollar in the earlier trading session.
Chatib said a plan by the US Federal Reserve to hike the interest rate was the main cause of the rupiah's depreciation. The current rupiah rate, he said, follows the intention of the Fed's plan.
'The depreciation was started after the Fed held a meeting of the Federal Open Market Committee [FOMC] on Sept. 16 to 17. The rupiah continued to depreciate after the Fed's Governor Janet Yellen gave a strong signal that the rate hike would occur sooner,' he said, as quoted by kontan.co.id on Sunday.
According to Chatib, it will be better for market players to price-in under the current pressure from the Fed as they will not face a huge shock when the official plan is announced.
The government had given a similar suggestion earlier to the market when it announced that the current account deficit could reach US$9 billion in the second quarter, he said.
BI deputy governor Perry Warjiyo added that the rupiah depreciation, apart from the Fed's plan, was also influenced by the current account deficit and the domestic political situation, which gave Indonesia more specific problems compared to other regional currencies.
'However, BI will always maintain the rupiah rate according to its fundamental value. We will insure that BI will intervene if there is too much volatility,' he said.
