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View all search resultsRupiah undervalued, says BI
Undervalued: BI senior deputy governor Mirza Adityaswara says that although the rupiah exchange rate is âundervaluedâ, Indonesia does not need to follow Chinaâs decision to devalue the yuan
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Undervalued: BI senior deputy governor Mirza Adityaswara says that although the rupiah exchange rate is âundervaluedâ, Indonesia does not need to follow Chinaâs decision to devalue the yuan. (Courtesy of Kompas) (Courtesy of Kompas)
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span class="caption">Undervalued: BI senior deputy governor Mirza Adityaswara says that although the rupiah exchange rate is 'undervalued', Indonesia does not need to follow China's decision to devalue the yuan. (Courtesy of Kompas)
Bank Indonesia (BI) records show that the rupiah's exchange rate against the US dollar has declined by 8.5 percent since the beginning of 2015 and that it has seen depreciation of more than 30 percent since 2013, an official has said.
BI senior deputy governor Mirza Adityaswara said that from this information, it could be said that the rupiah was 'undervalued'.
He said that based on the real effective rate (RER) index, a measure of currency competitiveness, Indonesia's rupiah stood below 90. Despite this, the deputy governor said, Indonesia did not need to follow China's decision to devalue its currency.
As reported earlier, the Chinese government devalued the yuan by 1.86 percent against the US dollar to boost the competitiveness of the country's export products.
'The rupiah's index is below 90. Still, Indonesia does not need to follow China's depreciation policy,' said Mirza in an interview on Tuesday, as quoted by kompas.com.
Mirza said the rupiah had been under a lot of pressure compared to other currencies, such as the Japanese yen and the South Korean won. The yen exchange rate against the dollar has depreciated by 25 percent over the last 2.5 years while the won exchange rate against the US currency has dropped by 6 percent since the beginning of 2015. These performances are worse than that of the Chinese yuan, which has declined by only 2 percent against the dollar over the same period.
Mirza said that China's yuan was still quite strong against the strengthening US dollar compared to the currencies of its main trading partners, Japan and South Korea.
At present, he said, Indonesia did not need to boost the competitiveness of its export products by devaluing its currency.
'China's trading competitors for manufacturing are Japan, Singapore and South Korea. If China's currency appreciates, the country's export products will become more expensive, which may lead to a decline in exports. China doesn't want [this] to happen because the country's economic growth has dropped significantly,' said Mirza, explaining main reasons for China's decision to devalue yuan. (edn/ebf)(++++)
