Post-Election Correction Normal, Analyst Says

TEMPO.CO, Jakarta - Money market observer Lindawati Susanto said that the rupiah depreciation following the legislative election is understandable, particularly because the rupiah had strengthened significantly since the beginning of the year.

The current correction is still within market participants' tolerable limits. After experiencing the highest appreciation among other Asian currencies, the rupiah needs a short break. "As long as the rupiah is still within the range of Rp11.300 to Rp11.500 per US dollar, I think it is still safe," said Lindawati.

The too-fast appreciation had triggered excessive expectations on the rupiah. As a result, when sentiment reversed courses, market participants panic regardless of the positive fundamentals of the Indonesian economy as indicated by the domestic economic data such as the foreign exchange reserves that reaches more than US$100 billion.

"The rupiah's volatility is high because the market is too sensitive is responding to a sentiment," she said.

The rupiah is experiencing quite a pressure after the Indonesian Democratic Party of Struggle (PDI-P) failed to achieve the 25-percent vote threshold to enter the presidential election. This means that PDI-P must form a coalition in order to be able to hoist Joko Widodo as its presidential candidate. This keeps the market guessing about which political figure the party will chose to partner with Joko Widodo.

However, Lindawati warned that the weakening of the rupiah is not only caused by political factors. The currency is also affected by the weakening of other Asian currencies due China's demand slowdown. On the other hand, the Fed had hinted that it would accelerate its stimulus cutback policy, threatening the dollar liquidity in emerging markets.

"This week, the rupiah will still be consolidated in the range of Rp11,400 per US dollar," she projected.

PDAT | M. AZHAR