On a decline: The rupiah may continue to underperform against the US dollar because of global and domestic sentiments
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The Institute for Development on Economics and Finance (Indef) revealed on Saturday that it was possible that the rupiah could fall to Rp 15,000 per US dollar by the end of the year as a result of uncertainty over the US Federal Reserve's (Fed) interest rate hike plan.
Indef economist Dzulfian Syafrian said the uncertain Fed fund rate hike plan was one of several external factors affecting Indonesia's economic condition.
'It is very likely that by the end of this year, the rupiah will reach Rp 15,000 per dollar because of the global uncertainty," said Dzulfian in a business and political economy discussion held by Indef in Jakarta on Saturday.
The analyst further said the fall of international commodity prices caused by China's economic slowdown, which had consequently weakened export performances, had aggravated the situation. Moreover, he said, Indonesia's exports relied heavily on raw materials, in which their added value was very low.
Dzulfian said that apart from global uncertainties, domestic sentiment had also contributed to the weakening of the rupiah. He said Indonesia's private short-term debt accounted for 30 percent of the country's total debt, causing a decline in the supply of US dollars, which eventually led to the weakening of the rupiah.
"If the rupiah continues to weaken and reach Rp 15,000 per dollar, it is likely that some banks will collapse," said Dzulfian.
Bank Indonesia's (BI) median rate showed that the rupiah weakened to Rp 14,709 per dollar on Friday from Rp 14,654 in the previous day. (ebf)
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