Indonesia central bank expects pressure on rupiah to be temporary: official

PRESSURE on Indonesia’s rupiah is expected to be temporary, a senior Bank Indonesia (BI) official said on Thursday (Sep 29), adding the currency is expected to strengthen to reflect its fundamental value later in the year.

Edi Susianto, who heads the central bank’s monetary management department, told Reuters in an interview BI would prioritise policies that support the market mechanism and he sees no need for capital controls.

The rupiah hit its weakest since April 2020 on Wednesday, as many currencies globally came under pressure amid a continuing rally in the US dollar.

Edi said he believes the rupiah’s exchange rate would return to a stronger level, reflecting Indonesia’s strong economic prospects later in the year. He declined to share BI’s estimate of the rupiah’s fundamental level.

“I have a belief that we will achieve the fundamental value (of the rupiah) … once the volatility and the sentiment in the market eases,” he said.

However, he predicted some volatility in the foreign exchange market in coming weeks as markets speculate on how much more the Federal Reserve would have to raise interest rates to tame the US inflation rate. REUTERS