JAKARTA (TheInsiderStories) - Indonesia is better placed to tackle any currency volatility and capital outflows triggered by higher US interest rates than during the taper tantrum in 2013, according to Goldman Sachs Group Inc, Andrew Tilton Goldman Sach’s chief Asia-Pacific economist said in his research.
The rupiah may not depreciate significantly from the current level as the high yield offered by government bonds give some buffer against capital losses. Foreign investors sold a net US$2.8 billion of Indonesian stocks and bonds last quarter as investors dumped emerging-market assets following Donald Trump’s surprise US election victory.
That the drove rupiah lower, forcing policy makers to intervene to stabilise the currency, in a trend reminiscent of the taper tantrum in 2013 when the US Federal Reserve’s signal of stimulus withdrawal prompted an Indonesian selloff.
“Indonesia has made several positive adjustments since the taper tantrum in 2013, including a narrower current-account deficit, lower gross external indebtedness and higher foreign-exchange reserves, all of which help to reduce its vulnerability,” Mr Tilton said in response to questions from Bloomberg.