Rupiah expected to stay safe despite pressures

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Finance Minister Bambang Brodjonegoro said that the rupiah exchange rate against the US dollar could remain in a safe position despite ongoing external pressures related to the US Federal Reserve’s (Fed) policy normalization plan.

“We will always keep on guard against external pressures toward the rupiah because one of the pillars of our economic resilience is the [stability] of the rupiah exchange rate. We hope Bank Indonesia [BI] can safeguard the rupiah to stay at a safe position. The most important thing is, rupiah should not be either too ‘undervalued’ or ‘overvalued,’” he said as quoted by Antara news agency on Tuesday. The minister was speaking to journalists in an event in Jakarta on Monday.

Bambang said that the current global trend of dollar strengthening was caused by circulating signals that the Fed’s fund rate adjustment might occur ahead of the end of this year. Currently, investors were anticipating such a possibility, he added.

“All currencies are affected by pressures from the appreciation of the US dollar, following the presence of signals that the Fed fund rate will increase before the end of this year. This has been used by financial market investors to speculate. The rupiah weakening is because investors use the US dollar as their ‘safe haven’,” he said

The minister further said that although currencies in developing countries tended to weaken against the US dollar, the rupiah exchange rate remained competitive against other currencies, such as the Euro and the Australian dollar.

“We see that our exchange rate against the Euro and the Australian dollar is relatively better [than against the US dollar]. This can be used as one of the considerations that we should not depend on the US dollar,” said Bambang.

The rupiah exchange rate, traded among banks in Jakarta, strengthened by 26 points to Rp 13,414 per dollar from Rp 13,440 on Monday afternoon. (ebf)

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