BI Affirms The Strengthening Of Rupiah Due To Good Fundamentals Of Indonesia's Economy

Illustration. (Photo: Bank Indonesia)

JAKARTA - The rupiah exchange rate has been in a strong trend recently. Bank Indonesia noted that there was an increase of 1.74 percent compared to the level at the end of December 2019.

The Governor of Bank Indonesia Perry Warjiyo said that the strengthening of the rupiah was in line with the fundamental condition of the Indonesian economy, the better market mechanism and the confidence of market players in the policies adopted by Bank Indonesia and the government.

"The strengthening of the rupiah was also driven by foreign exchange supplies from exporters as well as continued inflows of foreign capital in line with the maintained economic outlook for Indonesia, the attractiveness of the domestic financial market and the easing of global financial market uncertainty," Perry said in Jakarta, Thursday. 23 January.

He added that the structure of the foreign exchange market was also getting stronger, marked by the increase in transaction volume and more efficient quotations, as well as the growing domestic Non-Deliverable Forward (DNDF) market which then supported the increase in the efficiency of the forex market.

"Overall, the strengthening of the rupiah exchange rate has a positive impact on the momentum of economic growth and macroeconomic stability," he explained.

In the future, Perry continued, Bank Indonesia views that the rupiah exchange rate will remain stable in accordance with its fundamentals and maintained market mechanisms. To support the effectiveness of exchange rate policy and strengthen domestic financing, Bank Indonesia continues to accelerate financial market deepening, both the money market and the foreign exchange market.

Previously, there were concerns that the rupiah exchange rate would continue to strengthen through President Jokowi's statement. He had expressed his concern about the rapid strengthening of the rupiah exchange rate.

"Our rupiah exchange rate strengthens. If it strengthens too quickly we have to be careful. Some are not happy and some are happy. Exporters are definitely not happy because the rupiah is strengthening, strengthening, strengthening," said Jokowi.

Jokowi added, if the rupiah exchange rate continues to strengthen, not only exporters will be unhappy, but it can also make imports soar. The impact could lead to an enlarged trade balance deficit, and of course, widen the current account deficit (CAD).

For information, the rupiah exchange rate today strengthened 7 points or 0.05 percent and ended at the level of Rp13,639 per US dollar.