Bank Indonesia (BI) Governor Agus Martowardojo has predicted that the Indonesian Rupiah’s exchange rate against the US Dollar will continue to be volatile until March 20-21, or when The Federal Reserve announces its reference rate policy.
“For Indonesia, we realise the dynamics and see it as normal. The Fed is expected to raise its rate in March. Afterwards, the condition will be stable,” Governor Agus Martowardojo said on the sidelines of BI-IMF Summit on “New Growth Models in a Changing Global Landscape” in Jakarta on Tuesday.
The Rupiah traded at Rp13,650 per dollar on Tuesday morning and at Rp13,667 in the afternoon at the spot market, according to the Jakarta Interbank Spot US Dollar (Jisdor).
The Rupiah weakened by 0.24 percent against the US Dollar in the past year ending on February 21, 2018.
Martowardojo said the Indonesian currency’s volatility against the US dollar until the end of February reached 7-8 percent due to the improving economic data and the loose tax policy in the United States, which will lead to a rise in its 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 stabilise the market if the rupiah’s exchange rate against the dollar is no longer relevant to the country’s economic fundamentals.
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