JAKARTA (TheInsiderStories) – Indonesia Rupiah almost touched the lowest level in history at Rp16,800 a US Dollar, after continued to weaken at Rp16,570 on Monday (03/23). While, for the fourth times, Indonesia Stock Exchange halt the stock trading, after the Jakarta Composite Index plunged 5 percent to 3,985.076 compared to last Friday.
Selling pressures in the financial market intensified in March, after the COVID-19 outbreak entered the country. As of today, there have been 579 positive cases with 49 deaths and recovered 30 people.
Based on Bank Indonesia (BI) data, the exchange rate has fallen 19.35 percent from the position at Dec. 31, 2019 at Rp13,866 against the Greenback. S&P Global Ratings has warned, if the local currency above Rp15,000 a US Dollar, it will hurt a number of companies in the country, after last year aggressively increasing debt to billions of American Dollars.
According to director of S&P Global Ratings, Xavier Jean, due to structural mismatches between cash flow currencies and debt currencies, a number of sectors will have a greater impact such as property and manufacturing companies.
While in an official statement, BI will expedite implementation of Rupiah accounts for foreign investors as underlying transactions for Domestic Non-Deliverable Forwards (DNDF) in the country. For that, the central bank has issued Bank Indonesia Regulation No. 22/2/PBI/2020, effective March 19.
The amendment expands the underlying transactions for Domestic Non-Deliverable Forwards in the form of Rupiah accounts held by a foreign party, including savings accounts, demand deposits and term deposits, for investment purposes to accommodate investment returns and/or other purposes.
The new policy taken as part of Bank Indonesia’ efforts to strengthen its policy mix oriented towards mitigating the risk of COVID-19 transmission, while maintaining money market and financial system stability and stimulating economic growth momentum.
The Bank stated, by expanding the types of underlying transaction available to foreign investors and, thus increasing hedging alternatives against Rupiah in Indonesia, foreign investors shall be afforded greater flexibility while maintaining adherence to prudential principles.
by Linda Silaen, Email: email@example.com