Foreign Capital Flow Enters, BI Continues To Strive For Rupiah To Drop Below Rp. 16,000 Per US Dollar

BI Governor Perry Warjiyo (Photo: dock. Antara)

JAKARTA - Bank Indonesia (BI) said it continues to strive to reduce the weakening of the rupiah exchange rate to below Rp. 16,000 per US dollar. One of the drivers is starting to re-enter foreign capital flows or capital inflows into the Indonesian financial market.

Bank Indonesia Governor Perry Warjiyo said that the current movement of the rupiah exchange rate tends to be more moderate in line with the entry of foreign capital into the domestic financial market, both to the Rupiah Securities of Bank Indonesia (SRBI) and Government Securities (SBN).

"The rupiah exchange rate when we made a monetary policy decision, RDG (Governor Board Meeting in April 2024), is around Rp. 16,300, now around Rp. 16,000. With foreign capital flows coming in, our supply dollars are increasing and the confidence of market investors is getting stronger. Therefore, this can strengthen the rupiah exchange rate, and we are trying to decrease below Rp. 16,000," he explained in a media briefing on the latest economic developments, Wednesday, May 8.

Meanwhile, foreign capital flows that return to or capital inflow in domestic finance until the second week of May 2024 amounted to IDR 22.84 trillion.

Perry said that there was a flow of foreign capital that returned to the country after the benchmark interest rate or BI-Rate rose at the Board of Governors Meeting (RDG) in April 2024.

According to Perry, the entry of foreign capital flows also proves that the domestic and foreign investors market has welcomed positively 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.

Furthermore, Perry said that there was a foreign capital outflow in stocks. If the shares in the first and second weeks still have an outflow of IDR 5.03 trillion, so that the total portfolio inflow in the first and second weeks of May 2024 is 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.