Currently, the world is preoccupied with the strengthening of the dollar due to the policy of President of the United States (US) Donald Trump regarding import tariffs that hit the attractiveness of risky assets. In addition, strong US employment data that pushed expectations of a further rate hike by the Federal Reserve triggered currencies in Asia to feel the impact. Finance Minister Sri Mulyani Indrawati revealed that the global economy could face more pressure next year due to rising US interest rates and the impact of the global trade war.
But the World Bank (World Bank / WB) showed a positive response to the policies of the Indonesian government regarding “rampaging” against currencies, especially in the Asian region. The World Bank appreciates the steps taken by the Indonesian government and the central bank to halt the weakening of the rupiah against the US dollar.
The Washington-based international institution said the role of the central bank remained independent even though it continued to coordinate with the government. “The fact that all governments take care of two key issues, namely fiscal deficits and current account deficits (CAD), I think they respond very credibly and with a very good approach to control what has happened,” said the World Bank Representative for Indonesia and Timor-Leste Rodrigo A. Chaves. He conveyed this after attending the preparatory meeting for the IMF-WB Annual Meeting at the office of the Coordinating Ministry for Maritime Affairs on Monday (09/10/2018). “This is not a problem for Indonesia because Indonesia is particularly stable because it has a fundamental and good public policy response function,” he added.
At the close of trading on Monday, US $ 1 was valued at Rp. 14,852 in the spot market. Rupiah weakened 0.25% compared to the close of trading last weekend. When the market opened, the rupiah weakened by only 0.03%.
Thus, the Garuda currency has depreciated by more than 9% since the beginning of the year, according to Thomson Reuters data.
Indonesian society can be an important role to contribute to suppressing the weakening of the rupiah against the dollar if the following steps are taken as quoted by PermataBank Economist, Josua Pardede. He explained that if you want to help strengthen the Rupiah, Indonesian people can hold back the desire to go abroad.
“Maybe for Indonesians, it can be postponed first or detained for a holiday abroad. It can be a domestic trip first,” Josua said.
Josua said, the general public does not need to panic and market participants are expected not to carry out speculative actions that will encourage further strengthening of the US dollar.
Confidence in Indonesia’s solid economic fundamentals and the belief that Bank Indonesia will always be in the market and will take steps to stabilize the rupiah will certainly be effective in limiting the weakening of the rupiah.
In addition, if the community has a US dollar it is better to be released or sold first.
“If the market language takes profit first, exchange it first into the US dollar Rupiah,” he explained. Josua explained that currently BI and related parties are also trying to encourage the development of the tourism sector which is expected to accelerate foreign exchange receipts which in turn can improve the current account deficit which will ultimately encourage the stability of the rupiah exchange rate in the short term.
“In addition, if the volatility of the rupiah exchange rate tends to increase, BI is expected to again tighten its monetary policy in the short term to increase market confidence,” he said.
This was done by considering the improvement of economic fundamentals, the affirmation of Fitch on Indonesia’s debt rating that is still worthy of investment with outlook stable, so the government and BI are expected to be able to manage the stability of the rupiah so as to reduce the rupiah weakening below the level of Rp15,000 per US dollar.