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Yuan devaluation to continue, BI warns
Bank Indonesia (BI) Governor Agus Martowardojo said on Thursday that the yuan devaluation would continue as the currency was not competitive compared to the Korean won and other currencies in the region
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ank Indonesia (BI) Governor Agus Martowardojo said on Thursday that the yuan devaluation would continue as the currency was not competitive compared to the Korean won and other currencies in the region.
He said the Chinese government's policy of devaluing the yuan was part of its efforts to improve the country's exports so that they would be more competitive. The devaluation was also triggered by China's foreign exchange reserves, which had continued to decline.
The yuan devaluation had caused the rupiah to suffer quite a sharp fall, almost touching the level of Rp 13,800 per US dollar on Wednesday, and such depreciation was an overshoot, said Agus.
'In the last two days, the rupiah exchange rate has not reflected its fundamentals. This depreciation cannot be accepted. It has already overshot,' he said.
The central bank governor asserted that BI had been and would continue to stay in the market to carry out rupiah stabilization efforts.
By midday on Thursday, the yuan was down 2.9 percent since Tuesday's surprise announcement of a more flexible exchange rate, the Associated Press reported.
China tried to ease fears of more big declines for the yuan as companies from global automakers to Chinese clothing exporters faced a new era of uncertain exchange rates.
A deputy governor of the Chinese central bank, Zhang Xiaohui, said there was "no basis for persistent and substantial devaluation." Speaking in a press conference on Thursday, Zhang said the yuan was close to "market levels" after two days of sharp declines. (ebf)
