TEMPO.CO, Jakarta - Rupiah's interbank exchange rate in Jakarta drops by 63 points at the end of Tuesday's trading session. The Rupiah is down to Rp 12,218 per United States (US) Dollar from its' previous position at Rp 12,155 per US Dollar.
"Rupiah's depreciation is fuelled by the decline in Indonesia's economic fundamentals for the time being," said Rully Nova, a market analyst for Bank Himpunan Saudara in Jakarta on Tuesday, November 11, 2014.
According to Rully, Indonesia's limited fiscal space leaves little room for Indonesia to breathe - as such, Rully hopes that the government would commit to their promise to cut fuel subsidies to free up some budgetary space.
Rully added that despite the inevitable fact that cuts to fuel subsidy will cause inflation to rise, the effects are not expected to roll over into the long run. Precedents have shown that inflation tends to stabilise around three to four months after the initial hike in price.
On the other hand, the Head of Research at Monex Investindo Futures, Ariston Tjendra, said that investors are returning to invest in US Dollars, following a dip in its' value on Monday.
"Generally speaking, the US economic fundamentals are in a relatively better shape compared to the rest of the developed economies - especially in light of the monetary tightening policies set by the Federal Reserve Bank of America following its' decision to end its' stimulus program," said Ariston.
Bank Indonesia's Middle Rate on Tuesday stood at Rp 12,163 per US Dollar - down from its' previous position at Rp 12,138 per US Dollar.