Sri Mulyani: The Increase In US Securities Yields Are The Cause Of The Weakening Of The Rupiah

Illustration of rupiah currency. (Photo: By courtesy)

JAKARTA - Minister of Finance (Menkeu) Sri Mulyani Indrawati revealed that the increase in yields on US securities or US Treasury yields was the main source of pressure on the rupiah exchange rate.

Not only Indonesia, the movement of the US Treasury also affects global financial markets, especially in emerging market countries.

"Even though the interest rate set by the Fed (the US central bank) remains low, the market sees hopes for an increase in the inflation rate in America, this is what drives the US Treasury to increase," said Minister of Finance Sri Mulyani in a virtual press conference on our APBN, Tuesday. , March 23.

The minister added, the yield of US securities is now in the range of 1.7 percent, up 86 percent from the previous position. In VOI's record, this figure is the highest level in the last one year.

Meanwhile, several similar instruments in developing countries experienced similar things, such as Brazil with 29 percent growth, the Philippines with 48 percent, and Russia with 29 percent.

Sri Mulyani said that this condition needed to be examined more deeply in order to maintain the stability of the rupiah exchange rate against foreign currencies, especially the US dollar.

He also confirmed that the Fed will certainly not issue further strategic policies related to interest rates for the next two years.

"The Fed said it would not raise interest rates until 2023," said the minister.

As previously reported, the Governor of Bank Indonesia (BI) Perry Warjiyo said that the rupiah depreciation that occurred during March 2021 was influenced by the increase in US Treasury yields.

"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.

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