JAKARTA (TheInsiderStories) – The Indonesian currency rupiah declined on the first trading day of the March after finishing the month of February with losses. The rupiah also tracked the declines of regional currencies in the previous session.
Based on the Bloomberg Dollar Index, the Indonesian rupiah depreciated by 0.72 per cent to Rp13,800 per US dollar on Wednesday (28/02), the weakest level against the greenback in slightly over two years.
The weakening of the rupiah is in line with the performance of most other currencies as the US dollar is at a three-week high after Federal Reserve Chairman Jerome Powell struck a hawkish tone in his first congressional testimony.
Federal Reserve Chairman Jerome Powell said on Tuesday that despite recent volatility in financial markets, the Fed’s governor still plans to raise interest rates several times throughout 2018.
He told lawmakers “a gradual reduction in accommodative monetary policy will support a strong labor market while pushing the return of inflation to two percent.” The Fed’s new chief hinted that the central bank could raise rates more than three times this year, if economic data and inflation continue to prove healthy.
The US dollar index, which measures the greenback against six major currencies, rose 0.35 percent to 90.648 in late trading.
In late New York trading, the euro fell to 1.2202 dollars from 1.2236 dollars in the previous session, and the British pound dropped to 1.3769 dollars from 1.3917 dollars in the previous session. The Australian dollar fell to 0.7778 dollars from 0.7797 US dollars.
The US dollar bought 106.72 Japanese yen, down from 107.39 yen in the previous session. The US dollar rose to 0.9442 Swiss francs from 0.9389 Swiss francs, and rose to 1.2830 Canadian dollars from 1.2752 Canadian dollars.
Managing Director of International Monetary Fund (IMF) Christine Lagarde reminded the Indonesian government about the global uncertainties sparked by the Federal Reserve’s plan to normalize its benchmark interest rate. One of the impacts that affected Indonesia is the fluctuation of the rupiah.
Nevertheless, she said Indonesia’s economic fundamentals are now much stronger, enabling the state to curb turmoil effects, keep inflation at bay, and stabilize the exchange rate.
Bank Indonesia (BI) Governor Agus D.W. Martowardojo said the rupiah fluctuation against the US dollar is expected to continue until the third week of March. He ensures that the central bank will not let the rupiah weaken too deep.
“We will keep the rupiah at a fundamental level and always maintain the availability of the dollar,” he said.