Thailand
Indonesia: Rupiah volatility caused by external factors: BI
Bank Indonesia (BI) has assured the public that Indonesia’s economic fundamentals are improving, as indicated by the increase in foreign exchange reserves. Therefore, the central bank believes the unstable rupiah exchange rate is triggered by external factors.
BI deputy governor Dody Budi Waluyo said in Surabaya on Thursday that foreign exchange reserves had increased by US$2 billion to $117.2 billion in November, while full-year inflation was estimated to reach only around 3.5 percent.
“The credit growth is high enough at around 12 percent. So, as we see from the macroeconomic indicators, the rupiah should have been strengthening, but it has not happened yet,” Dody said, as quoted by kompas.com.
The rupiah exchange rate stood at Rp 14,526 per United States dollar on Thursday, according to the Jakarta interbank spot dollar rate (JISDOR). The exchange rate was Rp 14,252 earlier this month.
He said the rupiah volatility was caused by the expectation of a further hike in the federal funds rate, which was expected to be announced by the Federal Reserve this month.
He played down the notion that the rupiah’s weakening may be due to the expectation of a recession that might hit the US economy. “It is too early to say that there will be a recession. We can see that the development is still up and down, it cannot be considered as [a harbinger of a] recession,” he added.
He stressed that BI would closely monitor the global economic dynamics, particularly the trade relations between the US and China, the possible federal funds rate hike and the latest developments in Europe.
He said BI would use all instruments it had to keep the rupiah’s exchange rate stable. “We try to stabilize the rupiah with our policy mix – market intervention and exchange rate policy,” Dody added. (bbn)
Source: http://www.thejakartapost.com/news/2018/12/14/rupiah-volatility-caused-by-external-factors-bi.html