JAKARTA (TheInsiderStories) – Bank Indonesia (BI) senior deputy governor Destry Damayanti rated, the student rallies that took place since Sept. 23, was one of the causes of the weakening of Rupiah. The local currency has dropped significantly from 14,085 to 14,153.80 against the Greenback in three days trading.
Beside, domestic issues, global factors also affected the money market and hit the Rupiah rate. She asserted, “The demos that we have seen in the past two days have caused jittery shocks in our financial markets.”
Damayanti assured, that the central bank still in the markets to kept the foreign exchange stability. BI has also relaxed the monetary policy stance and made a policy mix to support the market.
Previously, she rated Rupiah will trade at an average of 14,000-14,400 against the US Dollar during of this year and 13,900 – 14,300 in 2020. While, Finance Minister Sri Muyani Indrawati admitted is hard to make prediction on the Rupiah rate under the global pressure, and in terms of credible macro policies and confidence.
“But these two factors will be accompanied by uncertain global conditions. Commodity prices are weakening,” she said further.
Beside causing the weakening of Rupiah, the demonstration also made foreign investors pulled out from Indonesia. Since Monday, the foreign funds outflows recorded Rp2.7 trillion (US$191.49 million).
Bhima Yudhistira, an economist at INDEF sees Rupiah could weaken within 14,200 – 14,400 against US Dollar if the political conditions not stable until the inauguration on Oct. 20.
“High tension of Indonesia Political will hold investments in risk assets and divert to safe assets,” said the economist.
Some analysts give a note that the global uncertainties estimating will create more uncertainty affect the Rupiah rate. ING in its latest report rated, the recent round of tariff slinging between the United States (US) and China has sparked emerging market foreign exchange weakness again.
Nicholas Mappa, ING Senior Economist said, the Indonesia Rupiah had been performing relatively well in the first four months of the year as a now dovish US’ Federal Reserves (Fed) signaled a possible window for emerging market’ central banks to pause and maybe even reverse their aggressive tightening of 2018.
Positive expectations for US – China trade negotiations bolstered the case for this but the month of May has added a wrinkle to that narrative: its tariff slinging time again, he added.
The recent escalation of trade tensions has sparked a heavy risk-off tone and emerging market currencies have been on the run since. For the month, the local currency has pulled back by 1.39 percent with the Rupiah under additional pressure as Indonesia recorded a wider-than-expected trade deficit for the month of April.
Today, the local currency closed down 1.26 percent to the level of Rp14,150 compared to American Dollar. Market data showed, foreign investors posted net selling Rp993.94 billion on the regular market. The large amount of foreign funds that came out also caused the decreased of Jakarta Composite Index by 1.1 percent to 6,137.61.
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