JAKARTA (TheInsiderStories) – Followed the Turkey‘s financial crisis, other emerging countries like Indonesia and Argentina prepared monetary stance on worries the economic troubles could hit European banks and spread to other emerging economies.
These days, Turkey’s crisis has bring negative impact to the emerging market. The Turkish Central Bank itself decided to pour a series of liquidity easing to reduce tensions over banking liquidity problems.
Tonight, President Joko Widodo will held a limited meeting to elaborate more the impact of the global market turbulence to the country. While on Monday (13/08), Bank Indonesia (BI) immediately open the foreign exchange auction at 1 p.m. local time, when the Rupiah dropped to Rp14,600 against US dollar and intervene the money market.
Central de la Republica Argentina (BCRA) took quick steps by raising its benchmark interest rate by 500 basis points to a record high of 45 percent. The central bank said in a press statement will maintain this level at least until October.
The decision to raise interest was taken after the Argentine currency broke the ARS30 per US dollar level for the first time on Monday. Peso finally closed down 2.3 percent to ARS29.93 against the American dollar.
BCRA also said it would gradually release the ownership of ARS1 trillion (US$33.2 billion) short-term bonds with the aim of reducing the volatility of the Peso when this effect was released. In addition, the central bank also replaced the dollar auction system to make it more difficult for traders and speculators to predict.
Today, BCRA also will face another mega maturity of LEBACs for about $525,000 million, with the aim of reducing those maturities by at least 25 percent. The new US dollar rally have complicated the objective of the president of the BCRA Luis Caputo, but still manages to international banks about $5 trillion in order to clean letters from the market for about $140,000 million.
In response to the announcement of the Argentine authorities’ plan to accelerate the reduction of the stock of LEBACs, Intenational Monetary Fund’ Chief Spokesman Gerry Rice stated, the Argentine authorities’ plan has been carefully designed by the government.
“Implementation of this plan should remove an important source of vulnerability as well as help contribute to a more effective monetary policy framework. The Fund supports the authorities’ efforts in this area which are consistent with the understandings reached under the IMF-supported Stand-By Arrangement,” he said.
In Indonesia, the central bank continued to intervene the foreign exchange (FX) market to curb global pressure on the Rupiah that has weakened beyond a new psychological level of Rp14,600 per US dollar. On Monday, the rupiah weakened 137 points at Rp14,643 against the US dollar in the spot market compared to last week at Rp14,486 over the greenback.
Executive Director of Monetary Management Department for BI, Nanang Hendarsah, stated, to anticipate the stronger pressure, BI is prepared to conduct dual intervention in FX and government bond market.
He added, the rupiah` weakening to a new psychological limit of Rp14,600 per US dollar as being inseparable from the negative impact of the global market sentiment following Turkey` financial turmoil. Hendasrah urged that the pressure on the rupiah until Monday afternoon could still be controlled.
For us and like other analysts said, US’s President Donald Trump trade and foreign policies started give an impact to the emerging countries and other global zones. If this situation continues we believed the impact will spreading to other zones like Asia, Europe and Latin America.