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The fluctuations of the world’s currency against the dollar are experiencing quite dynamics. Each country seeks to reduce the value of its currency as optimal as possible so that economic activities in the country are in stable condition. As reported by CNBC Indonesia on Monday (5/28/2018) that the main factor of currency volatility against the dollar in 2018 is due to developments in the Korean Peninsula. US President Donald Trump insists there is a big chance to return to meet with North Korean leader Kim Jong Un. Previously, Trump himself canceled the planned meeting on June 12 in Singapore.

However, these conditions do not make the value of the rupiah against the USD unmoved. The exchange rate of rupiah for the umpteenth time again victorious against the global eye. This condition does not escape the strong signal of interest rate increase by Bank Indonesia (BI). the rupiah strengthened almost 1% against the majority of currencies of countries in Asia to Europe. The following data of the rupiah movement as reported by Reuters:

Source: Reuters 28/5/2018

BI Governor Perry Warjiyo gave a strong signal that the central bank will re-adjust BI-7 Day Reverse Repo Rate reference rate. According to Perry, BI’s main priority in the short term is the stability of the rupiah.

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BI raised its benchmark interest rate by 25 basis points on May 17. However, this increase is less impact on the rupiah. Even the rupiah had weakened to the range of Rp 14,200 / US $.

Therefore, market participants expect BI to raise its benchmark interest rate in an additional Board of Governors (RDG) meeting on May 30. Market consensus compiled by CNBC Indonesia says almost all of the economists and analysts involved estimate a 25 basis point increase to 4.75%.
“We will respond quickly,” said Perry Warjiyo, Governor of BI, at a press conference today.

The possibility of BI raising interest rates makes foreign investors more interested in hunting for rupiah-based assets. From the stock market, net buy of foreign investors reached Rp 512.3 billion. Meanwhile, from the bond market, the yield movement began to fall to 7.193% position for 10-year tenor.

The flow of funds is so swift to make the rupiah exchange rate today strengthened. Not only against the USD, but also in the presence of a number of Asian currencies to Europe.
This is an achievement of the government’s performance, when the currency of other countries weakened, the currency in Indonesia is strongest and most dominant in Asia.

Reference: cnbcindonesia.com
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