he rupiah has hovered around Rp 14,000 per US dollar over the last several days, but analysts believe this is not the currency's new equilibrium.
Instead, they argue the rupiah's depreciation by 0.43 percent to Rp 14,097 per US dollar on Wednesday, was caused by strong external pressure.
“It happened because of external factors. It is temporary. If the US' monetary policy and its economic growth become more certain, the market condition will change,” said Bank Permata economist Josua Pardede in Jakarta on Wednesday, as reported by kontan.co.id.
Therefore, the current rupiah exchange rate against the US dollar was illustrative of its fundamental value, Josua added.
He said the rupiah exchange rate, which was at its lowest level since 2015, was caused by the market, which was still waiting for the announcement of the BI reference rate, and the US economy.
Bank Mandiri currency market analyst Reny Eka Putri agreed that the current rupiah exchange rate was not its new equilibrium and expressed her optimism that the currency would strengthen in the second half of 2018.
The strengthening of the rupiah would be sparked by BI’s response to the US' economic policy. She estimated that BI would increase its rate between 25 to 50 basis points.
Josua shared Reny’s opinion about the strengthening of the rupiah, but differed from her about the necessity of the central bank to increase its rate.
“[BI] still needs to see the aggressiveness of US' economic policy before increasing its rate. There will be [other] pushing factors that will strengthen the rupiah exchange rate,” Josua said. (bbn)
Share your experiences, suggestions, and any issues you've encountered on The Jakarta Post. We're here to listen.
Thank you for sharing your thoughts. We appreciate your feedback.