The Indonesian rupiah’s exchange rate against the US dollar will continue to be volatile until March 20-21 when The Federal Reserve announces its reference rate policy, Bank Indonesia (BI) Governor Agus Martowardojo has predicted. He said afterwards, the condition will be stable.
“For Indonesia, we realize the dynamics and see it as normal. The Fed is expected to raise its rate in March. Afterwards, the condition will be stable,” he said on the sidelines of BI-IMF Summit on “New Growth Models in a Changing Global Landscape” in Jakarta on Tuesday.
According to the Jakarta Interbank Spot US Dollar (Jisdor), the rupiah traded at Rp13,650 per dollar on Tuesday morning and at Rp13,667 in the afternoon at the spot market.
The rupiah weakened 0.24 percent against the US dollar in the year ending on February 21, 20018.
Martowardojo said the Indonesian currency’s volatility against the US dollar until the end of February reached 7-8 percent due to the US improving economic data and the US loose tax policy which will lead to a rise in the US government’s funding needs.
The US will meet the funding needs by issuing bonds, among others. As a result, yields on the US bonds have shown an upward trend in recent days, he said.
“We also look at the recent meeting of the Fed which signals the improvement of the US economy, thus triggering capital inflows to the US,” he said.
He said the central bank is ready to stabilize the market if the rupiah’s exchange rate against the dollar is no longer relevant to the country’s economic fundamentals.
“BI will continue to give a room to the rupiah’s exchange rate to reflect its fundamental condition. If it already goes beyond its fundamental value, BI will stay in the market,” he said.