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Looming US-China currency war to have little impact on rupiah: Analysts
The central bank and other economic experts have said that the recent dip in the rupiah was temporary and due to several external pressures, not just the potential of a US-China currency war.
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A currency board at a bank shows foreign exchange rates in this file photo. Bank Indonesia and local economists say that the potential currency war between the United States and China would have little effect on the rupiah. (Antara/Sigid Kurniawan)
The currency war looming between the United States and China has rattled global financial markets, but some analysts and central bankers believe it will not have a significant impact on the Indonesian rupiah.
The Chinese central bank allowed the yuan to fall below 7 to the US dollar last Monday, the first time in more than a decade, prompting Washington to label Beijing a "currency manipulator". The yuan depreciation came after US President Donald Trump announced he would slap another round of tariffs on Chinese imports starting Sept. 1, escalating trade tensions between the world's two largest economies.
Bloomberg data shows that the rupiah depreciated 0.5 percent last Monday following the announcement from Rp 14.255 per US dollar the previous Friday, Aug. 2, but slowly strengthened during the week to trade at Rp 14,194 over the weekend.
While the pending currency war has prompted investors to turn their heads to safe haven assets, the move was seen as temporary, said Bank Indonesia (BI) monetary management head Nanang Hendarsah.
“When the market calms, investors will be back on the hunt for assets with high returns, such as our SBN,” he said, referring to government debt papers.
