As the rupiah dropped to a record-low level of Rp 12,900 against the US dollar on Tuesday, the business community urged Bank Indonesia (BI) to take swift action to prevent the currency from falling even further.

According to Indonesian Employers Association (Apindo) chairman Hariyadi Sukamdani, as a monetary authority BI must take swift action to ease the rupiah'€™s volatility.

Hariyadi suggested the central bank should conduct monetary operations to stabilize the rupiah by releasing its US dollar reserves. He also saw more room to raise the BI interest rate to a little over 8 percent from the current 7.75 percent.

'€œBI must act swiftly because financial activities practically shut down after Dec. 22,'€ Hariyadi told The Jakarta Post on the sidelines of a CEO conference in South Jakarta, on Tuesday.

Hariyadi said the business community did not expect the rupiah to drastically slump so soon, adding that BI should have acted when the currency reached Rp 12,500 to the dollar.

Rupiah slightly rose to 12,680 against US dollar in the afternoon Tuesday after reaching 12,900 in early trading.

'€œBI should have been more anticipative. The costs are bigger if the fire has spread,'€ he said, adding that the year-end holiday season between Dec. 22 and Jan. 2, during which the rupiah would settle, was a critical period for the currency.

'€œAn interest rate hike would take too long to take effect, so a BI rate adjustment or monetary operations are needed for the short term. We must be prepared.'€

According to Hariyadi, the sharp drop of the rupiah can be attributed to the large volume of dollar purchases used to pay for corporations'€™ year-end debts, on top of the seasonal purchases of people going on holiday.

Meanwhile, PT Indomobil Suzuki International president commissioner Subronto Laras said businesspeople hoped the rupiah would be able to return to a comfortable exchange rate of around Rp 9,000 to 10,000 per dollar. He said that the automotive industry was particularly affected by a currency drop because it caused a negative trade balance, as components were often purchased from overseas in dollars.

Despite this need for BI to act quickly, Apindo advisory board member and recent government economic advisor appointee Sofjan Wanandi said the rupiah'€™s high volatility should not be taken at face value.

'€œMost of the speculation surrounding the currency has come from abroad, like from Singapore. In reality, there aren'€™t that many [dollar-buying] transactions at all,'€ Sofjan told the Post on Tuesday.

Sofjan said that the private sector should not worry too much about history repeating itself, as when the currency fell deeply during the 1998 financial crisis.

'€œSome businesses are still haunted by old specters even when they shouldn'€™t worry about them. They ought to remember that this is happening on a broader scale,'€ he said, adding that they were better off rethinking import strategies.

Meanwhile, David Cowen, the International Monetary Fund'€™s (IMF) Asia-Pacific department advisor, said that BI had already acted accordingly in such a situation and that the government should follow up with similarly firm actions.

'€œFrom our perspective, BI has done a good job in [creating] a stable macroeconomic environment. As for the government, the challenge will be to turn some proposed reforms into actionable results,'€ Cowen said.

'€œThat story will bolster confidence and help contribute to internal stability and support growth.'€

Cowen suggested that people should not get caught up in the day-to-day development of the markets, as much of the pressure may have been driven by events from abroad.

'€œI think we'€™ll have to see how it plays out, but nobody predicted the falling oil prices,'€ he explained, adding that the monetary body had no projections about when the dollar appreciation would ease.

Cowen said the government was already pursuing a prudent fiscal stance, as the country'€™s fundamentals remained strong in the medium term.

The IMF predicted that Indonesia would achieve a 5.1 percent growth next year, not much different from this year.