President: Investors confidence on government policies makes Rupiah stronger

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Photo JKW

JAKARTA (TheInsiderStories) – Indonesia President Joko Widodo says the strengthening of the Rupiah reflects investors confidence on the government recent economic policies, which are supported by Bank Indonesia (BI) and Financial Services Authority (OJK) regulations.

“The strengthening and improvement of rupiah means that the deregulation policy packages that we (the government) have launched, as well as issued by Bank Indonesia and OJK, are responded positively by business community,” President Joko Widodo said.

Based on Bank Indonesia data, the Rupiah against the US dollar has strengthened by 5.4 percent year to date (YTD) to Rp 13,149 compared to Rp 13,898 on Jan. 1. The rupiah strengthened among other currencies such as the Malaysian Ringgit, which has strengthened 4.8 percent (YTD) against US dollar, the Chilean Peso 4 percent, the Singapore dollar 2.8 percent, the Russian ruble 1.9 percent and the Thailand Baht 1.7 percent.

BI Governor Agus Martowardojo is echoing the President’s statement, saying that the strengthening of Rupiah indicates market confidence on structural reforms carried out by Indonesia. He added, in the period of January to February, the capital inflows to Indonesia have reached more than Rp 30 trillion (US$2.30 billion).

”The (government) policy looks appear to be fairly consistent and issued continuously which have also eased inflation and also improved trade surplus. This brings confidence that leads to substantial funds inflow to Indonesia,” Agus stated.

Finance Minister Bambang Brodjonegoro added that the strengthening of the Rupiah began to appear since the beginning of the year, which has led to an increase of the country’s foreign exchange reserves, which rose to $104.54 billion in February.

Meanwhile, Coordinating Minister for Economic Affairs Darmin Nasution saw the movement in the exchange rate is now approaching its fundamental value (real effective exchange rate) and should no longer strengthen too far.

He said the government will coordinate with BI to find the right instruments to push down interest rates, while the government would do its part by push down its treasury bonds rates.

“Some say the fundamental (fair value) of rupiah is in the range Rp 12.500 to Rp 12,700 per US,” Darmin said. He noted other countries in the world have also used affirmative policies to drive down interest rates in order to spark economic activities, with some countries even adopting negative interest rates, where interest rates are lower than inflation.

He said the strengthening of rupiah is also aided by the Fed’s move to pause rate hikes.

Permata Bank economist Joshua Pardede said that most market participants and business players want a stable exchange rate. If rupiah strengthens too quickly, it may harm exporters. The central bank’s move to reduce BI Rate should also prevent rupiah to strengthen too fast. (*)

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Source: The Insiderstories
President: Investors confidence on government policies makes Rupiah stronger

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