Bank Indonesia Confident Rupiah to Stabilize This Year Despite Weakening 5.9 Percent
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9 July 2024 08:14 WIB
TEMPO.CO, Jakarta - The Governor of Bank Indonesia (BI), Perry Warjiyo, is optimistic that the rupiah exchange rate will stabilize this year despite weakening by 5.9 percent year-to-date (y-t-d).
"We expect the rupiah exchange rate to be stable with a tendency to strengthen going forward,” Perry said in a meeting with the DPR Budget Agency on Monday, July 8, 2024.
Perry said Indonesia’s exchange rate weakened less than some countries including, Mexico, Thailand, Korea, Brazil, and Japan, where their currencies depreciated by 13.3 percent y-t-d.
The dollar remains strong over other currencies due to the Federal Reserve System or The Fed’s high interest rate policy which affects the foreign investment flow in other countries including Indonesia.
BI estimates that the Fed will only lower the interest rate once in 2024 for 25 basis points. In contrast, Perry is confident that the Fed will cut the interest rate by up to 75 points next year.
Perry believes lowering the interest rate will stabilize the rupiah. An attractive investment portfolio would also push for an inflow, especially in Government Securities (SBN) instruments.
Overall, the Bank Indonesia Rupiah Securities or SRBI had an inflow of around Rp130.35 trillion, while shares experienced an inflow of Rp340 billion. However, there was an SBN outflow amounting to Rp33.96 trillion. The portfolio inflow this year accounts for Rp91.5 trillion in general.
Perry is also optimistic that the rupiah would stabilize due to the state’s economic fundamentals, including the inflation rate and economic growth. Bank Indonesia also vows to maintain the exchange rate stability.
One of the measures to maintain said stability is intervening in the forex market. According to him, the current foreign exchange reserves are posited at Rp140.2 billion, a position which Perry believes is sufficient to put spot or forward intervention to sustain the exchange rate stability. Perry was grateful that the rupiah closed stronger last Monday at Rp16,250 per US dollar. "We project that this year's average will move around Rp15,700-16,100," he said.
ILONA ESTHERINA
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