Rupiah strengthens to below Rp13,000 on Tax Amnesty, weakening of USD

JAKARTA (TheInsiderStories) - The Indonesian government’s Tax Amnesty program appears to have positive impact on the country’s currency Rupiah as seen by the strong gain of Rupiah. On Tuesday (Sept 27), Rupiah touched the highest level on Tuesday’s trading at Rp12,950 against US Dollar since Oct. 8 at Rp13,991 level based on Bank Indonesia (BI) data before closed at Rp13,027.

Analysts say the risk appetite improved after investors see a positive sentiment on Tax Amnesty program and U.S. Democrat presidential runner Hillary Clinton the winner of the first debate with Republican opponent Donald Trump.

Finance Minister Sri Mulyani Indrawati said the strengthening of the Rupiah to the US dollar was attributable to various factors, including well-managed State Budget, the clear direction of the Fed on its interest rate policy which provides room for Indonesia to relax its interest rates and certainly the Tax Amnesty program which encouraged funds owners to repatriate their money to Indonesia.

“The amount of funds (under Tax Amnesty program) is quite significant, which explains why the Rupiah is strengthening,” she told reporters.

She admitted that the gains of Rupiah may affect revenues from exports. However, the positive side is that the strengthening of rupiah will help stabilize the inflation due to ease imported inflationary pressure. “The society in general can benefit from a stronger rupiah although it may have (negative) implication on State Budget revenues,” she said.

“However, the compensation is that we have stronger investment. In addition, in the short-term, the yields of government’s treasury bonds could decline, which compensates lower revenues from exports,” she said.

Joshua Pardede, economist PT Bank Permata Tbk, said the Rupiah touched the Rp12,950 level, the strongest level so far this year, as the US dollar weakened against other main world currencies, after Japan’s Central Bank said it supports a stronger yen.

Reza Priyambada, head of research of NH Korindo Securities, said the Rupiah movement in domestic market is no only helped by the uncertainty of the U.S presidential election debate but also helped by the increase of oil price after anticipate of big oil exporter meeting in Aljazair.

“Beside that, the Rupiah movement as we have said in media that the U.S currency tends to depreciate against most major world currencies ahead of the first debate of presidential candidates. The Rupiah appreciation against the US dollar as well as relatively positive domestic sentiment,” he said.

Towards the end of the first period of the tax amnesty, the amount of declaration fund seen rising. Easing the administrative process that launched from the Ministry of Finance could add impetus to the achievement of a ransom by the end of this year, he noted.

Uncertainty of U.S Election lift Asia Currency inclunding Rupiah

The Asia’s currency rate movements helped by the uncertainties of U.S presidential election that is currently included in the period of debate between the presidential candidates. The both of candidates will put forward its views on the economic recovery in the U.S. The conditions that trigger uncertainty thus negatively impacting the U.S currency.

The dollar was on the back foot and the safe-haven yen was buoyant as caution gripped the market ahead of the closely-watched U.S. presidential debate. Democrat Hillary Clinton and Republican Donald Trump will square off. While both Clinton and Trump are seen favoring a weaker dollar, some fear a Trump victory could expose the U.S. economy to more acute negative shocks with worse consequences for the U.S. dollar.

In the morning, U.S Dollar movement turns down against with the Asia’s currency. The USD/CNY move down -0,02% at CNY6,68; AUD/USD increase 0,43%; USD/KRW down -0,88%; and also with Rupiah which almost have touched Rp.12,928 or the lower rate since March 2016 which have touched Rp 12,990. (*)