Rupiah will Strenghten in Long Round, says BI
Governor of Bank Indonesia Perry Warjiyo. - Photo by

JAKARTA (TheInsiderStories) – Indonesia’s Central Bank (BI) kept its reference seven-day reverse repurchase rate (BI-7DRRR) at 5.75 percent to maintain economic stability, said Bank Indonesia senior deputy governor Mirza Adityawara on Tuesday (23/10). Since early of this year, BI-7DRRR has increased to 125 bps from 4.25 percent in January to 5.75 percent in this month.

“The Board of Governors decided to maintain the BI-7DRRR at 5.75 percent. The decision is consistent to reduce the current account deficit (CAD) to a safe limit and maintain the attractiveness of the domestic financial market so as to strengthen Indonesia’s external resilience amid high global economic uncertainty,” he said.

He also hinted that the CAD in the third quarter (3Q) of this year could be wider than previous quarter of US$8 billion, or equal to 3 percent of the gross domestic product (GDP).

Adityaswara explained the widening of the CAD in 3Q, could be attributed to weak export performance and high growth in imports. But he believed by the end of this year the CAD could lowered to 2.5 percent of GDP with the series of policies that were designed by the government to put a brake on import growth and to encourage the country’s exports.

At the press conference, he also announced starting Nov. 1, BI would effectively allow domestic non-deliverable forward (DNDF) transactions.

What the impact to the financial market on the central bank monetary stance? After having weakened in this morning, the Rupiah rebound from 15,208 to 15,193.45. Yesterday, Rupiah closed at 15,192.

Bank Mandiri Money Market Analyst Reny Eka Putri rated, the Rupiah would move in the range of 15,177 to 15,264 per US dollar due to the lack of domestic sentiment. While, CSA Research Institute Senior Analyst Reza Priyambada estimated that the Rupiah would move in the range of Rp15,185 to Rp15,172 per US dollar.

He expect, the increasing local currency was expected to be able to survive as there were still a number of positive sentiments from the internal.