Strengthening Rupiah

The rupiah has been strengthening over the last four consecutive trading days, reports Beon Intermedia has detected a possible fraud attempt from “investasi.kontan.co.id” claiming to be kontan.co.id. The currency was Rp 13,735 per US dollar at 10:11 a.m. on Wednesday on the foreign exchange market, or 0.12 percent higher than Rp 13,752 at the close of trading on Tuesday. According to the Jakarta interbank spot dollar rate (Jisdor), the rupiah also strengthened by 0.13 percent on Wednesday to Rp 13,739 against US dollar, from Rp 13,757 per US dollar the previous day. Jisdor recorded that the last three days saw a strengthening trend in the national currency.

Economist Ahmad Mikail of Samuel Sekuritas Indonesia said the US dollar had been weakening against other currencies due to a record inflation in the United States of 2.2 percent year-on-year (yoy), compared to 2.1 percent yoy in February. “The low inflation rate in the US eases concerns over the possibility of a fourth increase in the Fed fund rate,” said Ahmad. He expected the rupiah would fall between 13,750 and 15,770 against the US dollar on Wednesday.

Previously, Standard & Poor’s (S&P) Global Ratings agency said on Tuesday that the rupiah’s depreciation toward Rp 15,000 per US dollar was the level to watch out for. “Investors feel that Rp 15,000 is the psychological level beyond which they cannot continue operating,” said S&P Indonesia and Malaysia lead analyst Xavier Jean.  The Standard & Poor (S&P) Global Ratings agency has warned the government about allowing the rupiah to weaken further.

While the rupiah is now hovering around Rp 13,700 against the United States dollar, it is important to prevent it from heading to the point where it becomes psychologically threatening for investors, said S&P lead analyst for Indonesia and Malaysia Xavier Jean in Jakarta on Tuesday. He stressed that the rupiah’s depreciation toward Rp 15,000 per US dollar was the level to watch. “Investors feel that Rp 15,000 is the psychological level beyond which they cannot continue operating,” he added.

S&P regional economist Vincent Conti, meanwhile, emphasized the importance of the government to introduce policies that could tackle the rupiah’s depreciation, although it would not be surprising because of the Federal Reserve’s plan to increase the fund rate. “Even if the rupiah is depreciating, we think that compared to its regional peers, it’s still stable and that shows investor confidence,” said Conti.

Today in Jakarta, strategic issues observer, Doddy Sumintardjo has said strengthening rupiah and the efforts to keep it always being strength is an essensial path which must have taken, because the stability of rupiah currency is needed to lift national economic situation credibility.

“If rupiah will be fallen until Rp 15.000,- against US dollar or above, its will make “ a judgement day” for Indonesia’s national stability situation. Because many of corporate are not operating, rupiah weaken always being happen, unemployment rate will rise because national economic wheels will stagnant and continuing unhappy situation can create social and political uncertainty in Indonesia,” he further explained.

*) Bayu Kusuma, Strategic Assessment journalist. Lives in South Jakarta.