Rupiah Drops below Real Value, BI Says  

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  • TEMPO.CO, Jakarta - Bank Indonesia Governor Agus Martowardojo admitted that the rupiah has gone undervalued or dropped below its market price compared to the currencies of Indonesia's major trading partners.

    "Based on its REER (real effective exchange rate), the rupiah is slightly below 100," he said in Jakarta yesterday.

    On Wednesday, July 22, the rupiah was traded for 13,365 per US dollar.

    BI senior deputy governor Mirza Adityaswara said the rupiah has been undervalued for quite some time now. It began when it was hit by sentiments from speculations over the Federal Reserve's monetary normalization agenda in 2013.

    Creco Research economist Raden Pardede urges the government and the central bank to improve economic fundamentals to increase investment and raise hope for economic growth. One possible solution is to boost investment, both local and foreign, not just via portfolio.

    Chris Kanter, deputy chairman for trade and international relations of the Indonesian Chamber of Commerce and Industry, said the rupiah correction does create an opportunity to boost export. However, in the long run, it will only have negative impacts as importers will end up buying raw materials for a high price; harming investments in the process.