BI: US Dollar Strengthening Will Not Last Long

TEMPO.CO, Jakarta- Bank Indonesia (BI) expects the US dollar strengthening against almost all currencies will not last long due to the raising the Fed Funds rate by the Central Bank of the United States towards the end of this year, officials said Friday, August 7.

"I believe itt won’t be long, if later in September US interest rates increase, then again in December. After that hopefully the financial market will be more stable," said Senior Deputy Governor of BI Mirza Adityaswara at the BI Office in Jakarta on Friday.

According to him, the current situation is similar to 2013, when the financial markets waited for the US reduction of monetary stimulus.

“(At the time) the financial markets of emerging market countries shook, but after the stimulus was actually reduced in 2014, the financial market became even more stable,” said Mirza.

He said that after a rise in US interest rates, either in one or two hikes, inflowing capital is expected to return to Indonesia.

“They understood the inflation has dropped, from 8.3 percent last year to 4.3 to 4.5 percent this year. Next year may be it will be 4.5 percent. CAD (current account deficit) has dropped significantly to 2.5 per cent of the GDP. then later after December, the financial markets will be positive," said Mirza.

With the current financial market conditions, BI the monetary authority will continue to maintain the stability rupiah exchange rate in the market, Mirza continued.

"Ofcourse Bank Indonesia is present in the market to supply dollars. We use our dollar reserves. (The reserves) are still very good, around 6.5 months of imports and due debt payments," said Mirza.

ANTARA