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Jakarta Post

Analysis: Flagging rupiah: Fundamental or contagion?

  • Faisal Rachman

    Mandiri

Jakarta   /   Wed, September 12 2018   /  03:14 am

The rupiah reached its lowest level since the 1998 Asian financial crisis against the US dollar in early September. The currency has depreciated by 10 percent year-to-date.The Indonesian government argues that external factors are the reasons for the rupiah’s fall, including the Federal Reserve’s monetary tightening continuation and the negative sentiment spreading over emerging markets (EM). The authority explained that the 1998 crisis was not likely to repeat as Indonesia now has solid macroeconomic fundamentals. Moreover, it emphasized that it would implement some mitigation strategies to reduce the current account deficit (CAD) in order to curtail dwindling international reserves. Bank Indonesia (BI) also asserted it would keep maintaining rupiah stability through preemptive, front-loading and ahead-of-the-curve policy, as well as FX market intervention. BI’s benchmark interest...