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Bank Indonesia's Governor Perry Warjiyo Believed Rupiah will Strengthened in Long Round - Photo by BI Office.

JAKARTA (TheInsiderStories) – Bank Indonesia (BI) is optimistic that the Rupiah could be stronger than the previous year. Although the local currency fell 0.21 percent today (03/04) to 14,140 against the US dollar compared to last weekend, said the Governor Perry Warjiyo. He rated, the Rupiah position still undervalued.

“Last year the Rupiah has been continuing to strengthen. It is now stable at around 14,000 per US dollar. In the future, the exchange rate forecast will remain stable,” he said at UBS Conference in Jakarta.

Warjiyo revealed, there were four factors that made the Rupiah stable and could be stronger in the future. First, the flow of foreign capital that continues to enter and could finance the current account deficit.

Second, the United States’ Federal Fund Rate is projected to only be two percent. Third, Indonesia’ economic fundamentals are getting better. And fourth, the market mechanism is growing.

Even so, with a lot of uncertainty in the global market, BI will develop five strategies such as monetary policy, macro-prudential policies, payment systems, Islamic financial and financial market controls, he added.

Warjiyo believed, the strengthening of US dollar will certainly suppress other currencies, including the Rupiah. But, the movement of the Rupiah is currently more stable, he stated, supported by four main factors.

The first factor has supporting the strengthening of the Rupiah are the investor confidence. This was evident from the continued flow of foreign capital, he adds.

“Foreign capital continues to flow in portfolio investments such as bonds, stocks, and other assets,” Warjiyo said in Jakarta.
Second factor, he continued, was the existence of policy synergies between the government, BI, and Financial Services Authority. The central bank also coordinated with the government to encourage exports, ranging from automotive, electronic, garment and food and beverage products.
The third factor that affects the rupiah rate was the growing market mechanism. Now, the market does not only depend on spot or swap, but also Domestic Non Deliverable Forward (DNDF), sadi the governor. So far, the volume of DNDF transactions continues to increased. To further support the new instrument, BI ensures that foreign exchange liquidity is available, whether in spot, swap or DNDF.
The fourth factor, said Warjiyo, the resilience of the country from external shock was indeed getting better. Including from the side of the lower current account deficit (CAD).

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