Jakarta. The rupiah will likely depreciate to nearly 15,000 against the US dollar next year on the back of the US Federal Reserve increasing interest rates and Bank Indonesia cutting its rates, an analyst says.
Jahanzeb Naseer, head of equity research for Indonesia at Credit Suisse Securities Indonesia, said on Monday that the currency could weaken by between 6 and 8 percent by the end of next year. The rupiah has lost 11 percent of its value against the greenback in 2015, trading at 13,872 on Monday.
"Because the central bank will cut rates, I don't think [the rupiah] will appreciate but it will be stable," Naseer told reporters in a media briefing in Jakarta.
He said the central bank was expected to cut its policy rate by a total of 75 basis points — in a three-part strategy of 25 basis points each — throughout 2016. Inflation is projected to cool to a range of 3 to 4 percent during the same period, Naseer said.
He added that many companies were now better prepared to face the rupiah's depreciation, citing BI's mandate for companies to hedge at least 20 percent of their dollar-denominated assets.
"There will still be [foreign exchange] loss, but it will be half or less than half compared to this year," he said.
Naseer cautioned that rupiah depreciation of more than 11 percent next year could become a grave concern, especially for government spending.