Thursday, September 28, 2023

Currency, Bond Markets Point to Return of Foreign Investors Confidence in Indonesia

Triyan Pangastuti, Lona Olavia
April 17, 2020 | 11:10 pm
Bank Indonesia Governor Perry Warjiyo. (Photo curtesy of Bank Indonesia)
Bank Indonesia Governor Perry Warjiyo. (Photo curtesy of Bank Indonesia)

Jakarta. The rupiah has appreciated for the last few days along with foreign capital inflow to government bonds, reflecting a return of investors' confidence in the country's financial stability amid the Covid-19 pandemic, Bank Indonesia Governor Perry Warjiyo said on Friday. 

Rupiah strengthened 1.8 percent to trade 15,503 against the US dollar on Friday, according to Jakarta Interbank Spot Dollar Rate. The currency had gained 4.5 percent so far this week and moved away from its record-low position early this month when it traded at 16,741 against the US dollar. 

Bank Indonesia (BI) also noticed foreign inflow in the past three days, with foreigners buying a total of Rp 3.4 trillion ($218 million) in government securities. That followed weeks of sell-off from the country's securities that saw more than Rp 170 trillion flown out the country. 

"It seems that confidence has returned. Thus the inflow occurs," Pery said.  


The governor said while the inflow has helped the rupiah to stabilize towards its underlying value, the central bank's constant presence in the market also helped prop up the confidence. 

"We showed that in March. The rupiah movement in April has stabilized according to the market mechanisms. So, BI reduces its intervention, which is why our foreign exchange reserves remained at around $120 billion," he said.

Various policies from the central bank made in concert with the fiscal and financial services authorities have also boosted investors' confidence, Perry said. 

The government has shifted some of its essential budgets to fund the Covid-19 mitigation and committed $25 billion for spending in healthcare, social safety net, and economic stimulus over the next few months. 

Finance Minister Sri Mulyani Indrawati said the government baseline prediction was now for Indonesia to grow by 2.3 percent this year, compared to 5.02 percent last year. In the first quarter, the Indonesia economy may have expanded by 4.5-4.6 percent, she said. 

"The second quarter will change very quickly due to social restrictions, work from home, a study from home, and other policies," she said. 

"If the second and third quarters show recovery, then we can be optimistic that 2.3 percent can be achieved," Sri Mulyani said.

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