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Jakarta Post

New fragile five and threat of financial chaos

Jakarta   /   Thu, June 7, 2018   /  02:35 pm
New fragile five and threat of financial chaos An employee counts banknotes at a money changer at the ITC Kuningan shopping center in South Jakarta on Feb. 28. (Antara/Puspa Perwitasari)

In the last couple months, Indonesia and several emerging countries’ financial markets have been unpredictable. Unfortunately, relative to other emerging economies in Asia, Indonesia is taking the biggest hit.

Fund managers have sold more than US$3 billion Indonesian bonds and stocks since the beginning of the year. The rupiah also plunged below the psychological level of Rp 14,000 per US dollar, which is its lowest level since 2015. Currently, the currency fluctuates between Rp 14,100 and Rp 14,150 per US dollar.

In response to this mayhem, Bank Indonesia (BI) has drained more than $7 billion in reserves since early February. It was not enough to stop the bleeding. The central bank finally hiked its interest rate on May 17 and 31 respectively by 25 basis points to 4.75 percent defend the currency.

This raises a fundamental question: Is ...

Disclaimer: The opinions expressed in this article are those of the author and do not reflect the official stance of The Jakarta Post.