JAKARTA (TheInsiderStories)—Rupiah hit the lowest level since 2015 as fears over the looming economic crisis in Turkey spreads to other emerging economies. Rupiah weakened 0.97 percent at Rp14.610 per US$1 at 12.02 WIB, the lowest since October 2015.
The Rupiah’s weakest position today was at Rp14,615 per US$1, while the strongest is Rp14,490 per US$1. Finance Minister Sri Mulyani Indrawati said on Monday (13/8) that there are many factors that affect rupiah depreciation against U.S dollar. But for this time, a crisis in Turkey brings a large effect on the rupiah weakening, said her.
“Every day there are always various factors that can influence each other. So in the last week, this factor came from Turkey,” Indrawati added.
She said that the impact of the Turkey crisis will not only affect the economic sector but also political and security. However, she ensured that Indonesia’s economy is still quite positive as reflected by expanded gross domestic product (GDP) in the second quarter of this year at 5.27 percent.
But she admitted that Indonesia has a persistent current account deficit (CAD) problem which surpassed 3 percent level that put more pressure on the rupiah exchange rate. Even though it is still lower than in the 2015 tapper tantrum which the CAD reached above 4 percent.
The Minister urged the government would always conduct precautionary action amid global economic uncertainty. She added that current global economy differed from 2015 when quantitative easing was still occurring and the new interest rate was not disclosed.
“Now interest rates have risen globally and quantitative easing has begun to be reduced, this is what causes more pressure on various currency in the world,” she said.
Meanwhile, Bank Indonesia‘s deputy governor Dody Budi Waluyo said that in order to stabilize rupiah, the central bank will hold a foreign exchange (FX) swap auction this afternoon.
Furthermore, Executive Director of Monetary Management Department Nanang Hendarsah added that the central bank is preparing to carry out dual interventions with stability in the state securities market. Bank Indonesia will also intervene in the forex market and but state securities to stabilize the domestic financial market.
“Bank Indonesia is stabilizing on the forex market. So far the pressure can still be controlled and we are trying to reduce it,” he said, as quoted by local wires.
Crisis in Turkey triggered anxiety that spread quickly to the European financial market and other developing countries. Turkish Lira suffered 18 percent fell against U.S dollar on August 10, 2018, the lowest since 2001. The Lira exchange rate has also fallen 42 percent against the U.S dollar throughout 2018.
Furthermore, Turkey’s fundamental economy seen a problem on the current account deficit that persistently rises. In 2016, the country’s CAD reached $33 billion, exaggerated to $47.4 percent in 2017, and reached $57.4 billion by August 2018.
In addition, Turkey’s lack of fundamentals was seen from the country’s overheating economy where economic growth was above 7 percent but its inflation up to July 2018 reached 13 percent.