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Rupiah hits two-year high, but concern grows over impact on exports
The rupiah, which hit a two-year high at13,639 per US dollar on Jan. 20, further increased to 13,583 per dollar on Friday.
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A currency trader shows US dollar notes in a money changer in Jakarta. The rupiah continues to strengthen against the US dollar in the past three weeks amid the inflow of foreign funds into the country.
(Antara/Hafidz Mubarak A)
T
he rupiah has continued its upward trend against the United States dollar since the turn of the year as the easing of geopolitical tensions encouraged the inflow of foreign funds into emerging markets including Indonesia.
The rupiah, which had traded at 14,000 per US dollar for most of 2019, started 2020 with an optimistic outlook as the Indonesian currency managed to pass below the 14,000-mark at 13,900. The rupiah continued its upward trend in the following days.
The rupiah, which reached its two-year high at 13,639 per US dollar on Jan. 20, further increased to 13,583 per dollar on Friday. However, it slightly dropped to Rp 13,600 on Monday afternoon amid concerns over the spread of the deadly coronavirus that has spread to many countries since it was first detected in Wuhan, China, several weeks ago.
The rupiah might indicate the strength of the country’s economic fundamentals, but many people, including President Joko “Jokowi” Widodo, have expressed concern that the strong rupiah could make Indonesian goods more expensive overseas.
“Our currency is getting stronger, but we have to be careful when the strengthening happens too fast,” he said during his remarks at the annual financial services industry meeting in Jakarta on Jan. 15.
Bank Indonesia (BI) Governor Perry Warjiyo, however, insisted on Jan. 22 that there was no reason to worry about the appreciation of the rupiah as its upward movement was in line with the market’s response to the range of positive sentiment on the country’s economic conditions.
“Our inflation is at its lowest level, our economy continues to grow, our balance of payments is in surplus and foreign capital continues to flow into our country,” he said during a press conference in Jakarta. “That’s why the rupiah has continued to gain strength thus far.”
