JAKARTA (TheInsiderStories) – Deputy governor of Bank Indonesia (BI) sees the Rupiah will trade at an average of 14,000-14,400 against the US Dollar during of this year and 13,900 – 14,300 in 2020. In the first half of today Rupiah closed up 0.06 percent to 14,258 over the Greenback.
Recently, BI has intervened the spot market and Domestic Non Deliverable Forward to stabilize the local currency. The central bank also intervened the government bond’ secondary market.
While, Finance Minister Sri Muyani Indrawati admitted is hard to make prediction on the Rupiah rate under the global pressure, and in terms of credible macro policies and confidence. “But these two factors will be accompanied by uncertain global conditions. Commodity prices are weakening,” she said further.
Starting today, the government and House of Representatives began the discussion of macro assumptions that would become the reference for the 2020 State Budget. President Joko Widodo has announced the preliminary assumptions plan 2020 in August 16.
He proposed the economic growth 5.3 percent, inflation still in the range of 3.0 percent, Rupiah 14,400 per US Dollar, the three-month Treasury Letter rate is 5.4 percent, Indonesia Crude Price $65.0 a barrel, also oil and gas lifting 734 thousand barrels per day and 1,191 thousand barrels of oil equivalent per day, respectively.
Indrawati said that the government now mitigated the arising risks from several other emerging markets, such as Argentina, Brazil, Mexico, Hong Kong. Most important, she added, to avoid the impact of the global risks to Indonesian economy.
Some analysts give a note that the global uncertainties estimating will create more uncertainty affect the Rupiah rate. ING in its latest report rated, the recent round of tariff slinging between the United States (US) and China has sparked emerging market foreign exchange weakness again.
Nicholas Mappa, ING Senior Economist said, the Indonesia Rupiah had been performing relatively well in the first four months of the year as a now dovish US Federal Reserves (Fed) signaled a possible window for emerging market’ central banks to pause and maybe even reverse their aggressive tightening of 2018.
Positive expectations for US – China trade negotiations bolstered the case for this but the month of May has added a wrinkle to that narrative: its tariff slinging time again, he added.
The recent escalation of trade tensions has sparked a heavy risk-off tone and EM currencies have been on the run since. For the month, the local currency has pulled back by 1.39 percent with the Rupiah under additional pressure as Indonesia recorded a wider-than-expected trade deficit for the month of April.
In this month Board governor of BI decided to slashes a BI- 7DRR to 5.75 percent. Previously, BI Governor Perry Warjiyo stressed that it could reduce the benchmark rate with a note that macroeconomic and financial stability is maintained.
Macroeconomic and financial stability, according to him, can be done through increasing the portion of government bonds for foreigners so that there is a flow of funds into the country. This is done by cooperation with ministry of finance.
This year, Warjiyo said BI has asked Indrawati to issue more retail bonds in order to reduce the long-term fiscal burden in the era of high interest rates due to the nature of long-term government bonds while retail bonds were more short-term.
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