BI Reveals Factors That Can Strengthen Rupiah Exchange Rate

JAKARTA - Bank Indonesia (BI) said there are several factors that will support the strengthening of the rupiah exchange rate against the United States (US) dollar.

BI Governor Perry Warjiyo said that there are several factors that will support the strengthening of the rupiah exchange rate, namely the first is a differential yield yield.

Second, continued Perry, the risk premium has dropped.

Permi risiko yang turun terlihat dari Credit Default Swap (CDS) kredit 5 tahun per 7 Mei 2024 turun ke 69,9 sebelumnya ditas 70 indeksnya. CDS yang turun menunjukkan premi risiko yang turun, jelasnya dalam media briefing perkembangan ekonomi terkin, Rabu, 8 Mei.

Perry conveyed that the third factor that will strengthen the rupiah exchange rate is the prospect of better Indonesia's economic growth and the last factor is Bank Indonesia's efforts to maintain the stability of the rupiah exchange rate.

"The factor will support the strengthening of the rupiah exchange rate, and the exchange rate should be sought to fall below Rp. 16,000," he said.

Furthermore, Perry also conveyed other factors that would push the rupiah below IDR 16,000 per US dollar, namely the return to foreign capital flows to the domestic market.

The flow of foreign capital that returns or capital inflows in domestic finance until the second week of May 2024 is IDR 22.84 trillion.

Perry menyampaikan, terdapat aliran modal asing yang kembali masuk ke dalam negeri setelah suku bunga acuan atau BI-Rate naik pada Rapat Dewan Gubernur (RDG) April 2024 lalu.

According to Perry, the entry of foreign capital flows also proves that the market of domestic and foreign investors positively welcomes the decision to increase the BI-Rate and increase in SRBI.

"This shows that our decision to raise the BI-Rate and the Bank Indonesia Securities (SRBI) interest rate increases market confidence so that it attracts the portfolio's capital flow," he said in a media briefing on the latest economic developments, Wednesday, May 8.

He detailed that foreign capital flows that entered SRBI until the second week of May 2024 reached Rp19.77 trillion, consisting of the first week of Rp16.19 trillion and in the second week of May 2024 Rp3.58 trillion.

Furthermore, inflows also occurred in the Government Securities (SBN) market amounting to Rp8.1 trillion, with details in the first week of May 2024 amounting to Rp5.74 trillion and Rp2.36 trillion in the second week of May 2024.

Perry menyampaikan ada aliran modal asing yang keluar atau capital outflow pada saham.

"In the first and second weeks, there is still an outflow of IDR 5.03 trillion, so that the total portfolio of inflows in the first and second weeks of May 2024 amounted to IDR 22.84 trillion," he explained.

However, Perry believes that the stock condition in the future will be better, related to the prospect of more moderate economic growth and inflation in the future.

In addition, Perry said that the portfolio's foreign capital flow will be determined by three things on the cover interest rate parity (CIRP), namely differential yield, premium risk, and economic prospects.

"By increasing the BI-Rate and SRBI, our differential yield becomes more attractive, and it encourages foreign capital flows to enter," Perry said.