BI Boss Perry Warjiyo: The Fed's Policy Was The Culprit For The Weak Rupiah In March 2021

Dollar illustration. (Photo: By courtesy)

JAKARTA - Governor of Bank Indonesia (BI) Perry Warjiyo said that the rupiah depreciation that occurred during March 2021 was influenced by the increase in yields (US Treasury / UST yield) as a result of the policy of the central bank of the United States (US), The Federal Reserve or The Fed.

"This policy has made the US dollar to strengthen, which then has an impact on the weakening of the rupiah exchange rate," he said in a virtual press conference after holding a Board of Governors Meeting on Thursday, March 18.

According to Perry Warjiyo, the strengthening of the US dollar which in turn resulted in delays in the flow of foreign portfolio investment into the domestic financial market.

"We note that the current US Treasury yield is at the level of 1.62 percent for 10 years, up from 1.40 percent previously," he said.

Perry said that the increase in yields was in line with the prospect of US economic recovery which continues to improve in line with the trend.

To note, the rupiah until March 17, 2021 recorded depreciation of around 2.62 percent year-to-date compared to the end of 2020 level. As of Thursday, March 18 at 16.00 rupiah was traded in the range of Rp.14,431 per US dollar.

However, the BI Governor emphasized that the weakening of the domestic currency was not only experienced by Indonesia, but also many developing countries such as Brazil, Mexico, South Korea and Thailand.

"Bank Indonesia continues to strengthen the rupiah exchange rate stabilization policy in accordance with its fundamentals and the operation of the market mechanism, through the effectiveness of monetary operations and the availability of liquidity in the market," he explained.

On the same occasion, he also revealed that the monetary authority decided to maintain the BI 7-Day Reverse Repo Rate (BI7DRR) at 3.50 percent. In addition, the monetary authority also did not change the Deposit Facility rate at 2.75 percent, and the Lending Facility rate at 4.25 percent.

"This decision was taken to reduce instability in the international market and also to maintain the rupiah exchange rate," he concluded.