February's Weakening Rupiah Is Normal: Central Bank

Bank Indonesia said the depreciation of the rupiah in February is still within a normal range. (Reuters Photo/Iqro Rinaldi)

By : Adinda Normala | on 11:32 AM February 09, 2018
Category : Business, Economy

Jakarta. Bank Indonesia said the depreciation of the rupiah in February is still within a normal range, as the global market continues to fluctuates in the expectation of a planned interest rise by the US Federal Reserve, the central bank said on Thursday (08/02).

The rupiah fell 0.5 percent to 13,602 against the US dollar on Thursday from 13,533 on Wednesday, according to data from Bank Indonesia. The fall is the sharpest so far this year.

The rupiah's exchange rate in the 2018 state budget is set at 13,400 per US dollar.

"This is a normal adjustment [in the rupiah]. A rise in the fund rate is expected in March, so there is already a pressure in February," Mirza Adityaswara, the central bank's senior deputy governor, told reporters.

Mirza said the market now expects the US Federal Reserve will increase interest rates three to four times this year following improvements in the US labor market and the subsequent expected increase in inflation and yields of US state bonds.

Mirza believed the rupiah's adjustment will only be temporary and that Indonesia has more than enough foreign exchange reserves to deal with market outflows.

Indonesia’s foreign exchange reserves in January were valued at $131.98 billion, the highest ever in its recorded history, showing that the country has been more than able to maintain economic stability and stand up to pressures from the global economy.

The deputy governor also said Indonesia's private sector has proved to be resilient since around 90 percent of the companies have hedged their foreign currency-denominated debts after Bank Indonesia told them to do so in 2015.

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