JAKARTA (TheInsiderStories) – Indonesia’s President Joko Widodo was upbeat on the country’s economic fundamental, and turned down concerns over the rupiah currency depreciation.
“Our macro-economic fundamentals are in good shame, all countries are experiencing the same things about currency volatility,” Widodo told reporters after attending a meeting with some governors in Jakarta on Monday (30/4).
The rupiah has been trading near its lowest since January 2016 in the past week. It traded at 13,893 a dollar today.
Over the past few weeks the Indonesian rupiah has been under pressure as 10-year U.S treasury yields passed beyond the 3 percent level. Meanwhile, an improving U.S economy gives rises to expectations that the Federal Reserves will raise its benchmark.
At the same press conference, Bank Indonesia governor Agus Martowardojo said that the central bank will review whether it needs to raise its benchmark interest rate in case pressures on the currency persists and potentially derail the bank’s inflation target for this year, or should the currency volatility disturbs overall financial system stability.
A higher benchmark interest rate would make Indonesia a more attractive investment destination amid widening interest rate differentials with portfolio assets in the U.S, a save haven country. Should Indonesia increases its benchmark interest rate, it may help ease the risks of more capital outflows.
It has been nearly three and a half years since the central bank last raised its benchmark rate, which currently stands at 4.25 percent.
Indonesia’s foreign exchange reserves stood at US$126 billion at the end of March, $6 billion lower than the January level. BI has previously said it used the reserves partly for currency intervention, but has never revealed details.
Indonesia’s inflation rate accelerated to 3.40 percent in the third month of the year, up from 3.18 percent (YoY) in the preceding month but still comfortably within the central bank’s target range of 2.5 – 4.5 percent (YoY) for full-year 2018.