The rupiah has fallen about 16.26 percent this year and at on Friday morning, it once touched a fresh 17-year low of 14,470.(Bloomberg Photo/ Dimas Ardian)
Bank Indonesia Comfortable With Weakening Rupiah, Says Helps Exports
FEBRUARY 27, 2015
Jakarta. Indonesia's central bank signaled that it is comfortable with the drop in the rupiah as it makes exports more competitive in Southeast Asia's largest economy, a Bank Indonesia senior deputy governor said on Friday.
The rupiah has been trading around 12,800-12,900 against the dollar in the past week, touching a ten-week low on Tuesday. It has weakened almost 4 percent in the year.
"We need a competitive exchange rate to support exports of manufactured goods and decrease non-productive imports," Mirza Adityaswara, the deputy governor, told Reuters on Friday.
"The current exchange rate is competitive enough because the rupiah has weakened."
Chief Economics Minister Sofyan Djalil said after a meeting with the president and Bank Indonesia's governor on Tuesday that the central bank had not intervened significantly to defend the weak rupiah because both the government and the central bank are focused on improving domestic economic conditions.
"Why would we use our foreign exchange reserves to defend a falling currency if it was because of external factors?" Djalil said.
Central bank officials said the weak rupiah is mainly a consequence of a broadly stronger dollar, noting that the rupiah has actually appreciated against several other currencies this year.
Data from Bank for International Settlements showed the real effective exchange rate of the rupiah appreciating since the start of 2014.
That helped exports of manufactured goods to rise by 7 percent in 2014, Adityaswara said. Overall, however, exports contracted 3.4 percent last year on the back of sliding sales of commodities.