Jakarta, (ANTARA News) – Strengthening of rupees against the US dollar, which took place from the beginning of November 2018. It is slightly beyond the expectations of economic observers and financial market participants.
The rupee movement registered at around 15,200 at the end of October 2018. Suddenly reached $ 144,500 / Rp in mid-November. USD 14,600 per US dollar in just two weeks.
Although there was a weakening of 12 points, on Monday (12/11) in the morning it was Rup44,680 compared to the previous position with Rp. 14,668, Garuda's currency still looks solid compared to the movements of other currencies in developing countries.
Indonesian Bank Governor Perry Warjiyo revealed three reasons for the rupee exchange rate to strengthen in a relatively short time due to external and internal factors that support each other.
The first reason was the increase in global investor confidence due to the improvement of domestic economic indicators, such as quarterly economic growth in the third quarter of 2018. And the year-on-year (y / y) inflation rate of 3.16 percent in October 2018.
The Central Statistical Agency (BPS) announced the economic growth of Indonesia in the third quarter of 2018. At 5.17 percent. Year to year (y / y), which resulted mainly from household consumption.
Perry said the market reacted positively to improving data on economic growth, which was still above five percent in conditions that were still filled with uncertainty and inflation, which was still below the 3.5 percent target.
The second reason is the enforcement of the domestic non-controversial market (DNDF), which has just been issued by the central bank and has been in force since November 1, 2018. To maintain the movement of rupees.
Perry claimed that supply and demand in the DNDF market were good, and the total transactions lasted nine days with 115 million dollars.
As an example, in line with its objectives, national NDF enforcement may lead to domestic financial markets growing so that the NDF market abroad becomes less attractive.
The NDF Overseas market has been one of the reasons for the weakening of the rupee exchange rate on the domestic market before the domestic domestic NDF.
"Our monitoring of DNDF is developing quite well, supply and demand are growing, which contributes to the deepening of the market," Perry said.
The third reason is the reduction of the trade war between the United States and China after the planned meeting of US President Donald Trump and Chinese President Xi Jinping at the G20 at the end of November 2018.
The most influential meeting of stakeholders in the world is to discuss the solution of a trade war between two countries that has taken place since the beginning of the year and was expected by all global financial actors.
The condition of strengthening rupees also supported the inflow of foreign capital to the Indonesian financial market from the beginning of November 2018, which reached USD 19.9 trillion, which accounted for USD 14.4 trillion of US securities (SBN) and 5.5 trillion IDR shares.
Perry assures that the flow of foreign capital into government bonds and shares has shown the existence of global investors' confidence in the results of the Indonesian economy.
Increase your vigilance
Finance Minister Sri Mulyani Indrawati said that the phenomenon of strengthening rupees was good when developing countries, including Indonesia, were susceptible to economic strengthening in the United States.
For this reason, the movement of rupees in a positive trend must be maintained through various efforts, one of them is the continued transmission to financial market entities that Indonesian economic indicators are in a stable and stable state.
So far, the government has sought to maintain economic growth above five percent, low inflation and increase employment opportunities and reduce poverty.
In addition, the economic foundations have been strengthened by encouraging export-based investments and replacing imports and use of domestic goods so that the current account deficit (CAD) could be reduced.
In order to invite investors and reduce the consumption of imported goods, the government established an integrated licensing service system (OSS) and adjusted the PPh tariff for the import of consumer goods and requires the consumption of biodiesel (B20).
"We will continue to focus on maintenance so that we can continue to manage CAD, because it is one source that can lead to the perception of the Indonesian economy," said Sri Mulyani.
Economist Bahana Sekuritas Satria Sambijantoro warned that the positive movement of rupees was still temporary, because the market could react negatively to the results of the last three economic data.
Reactions that may trigger a weakening of rupees may occur especially if the expected results are outside the consensus estimate and the market participants do not provide (price in).
"Despite the strengthening of rupees and the return of capital to Indonesian bonds and stock exchanges, over the next few days, three important messages appeared that may affect the market sentiment," he said.
The announcement was made to implement the current account deficit in the third quarter of 2018, to reach the trade balance in October and the meeting of the Board of Governors of the Indonesian Bank in mid-November.
In the publication of the Bank of Indonesia published on Friday (September 11), the current account deficit increased to 3.37 percent of GDP or 8.8 billion dollars in the III-2018 quarter or accumulationally reached 2.86 percent of GDP.
The announcement of the results of the October trade balance will be announced in connection with the results of the meeting of the Board of Governors of the Indonesian Bank, which will decide on the reference interest rate on Thursday (11/15).
Meanwhile, a senior analyst at the CSA Research Institute, Reza Priyambada, added that global moods related to the normalization of interest rates policies of the American central bank (Fed) may still obscure the rupee movement.
He said that as long as the Fed is still considering a rate hike, the dollar movement is still potentially growing and distorting currency stability in developing countries.
Nevertheless, Reza projects that the potential for returning the depreciation of rupees is still limited, as domestic sentiment is still beneficial due to the improvement of economic data in Indonesia.
For this reason, this opportunity is an impulse to improve the current account deficit in order to increase the stability of rupees, so that it is not exposed to external pressure over the next few years.
The government also anticipated currency fluctuations in 2019, triggered by the possibility of a two-fold increase in interest rates by the Fed next year and the uncertainty of the trade war.
This is evident from the determination of the exchange rate assumption of approximately USD 15,000 per US dollar in the state budget in 2019. Considering the global risks that may cause the capital flow back to developed countries.
This determination takes into account the proposal of the Bank of Indonesia, which estimates the movement of the rupee exchange rate in 2019. For the range of 14 500 R / USD – Rp.15,200 for the US dollar.
By preparing a realistic and credible APBN, the government and the Bank of Indonesia have prepared fiscal easing to predict the global uncertainty that may occur next year.
With such coordination, it is believed that external or domestic pressure in the short and medium term will not affect the movement of rupees in relation to the US dollar.
However, the task of improving economic fundamentals by improving the current account balance must be carried out continuously, because good external news can be a heavenly wind and do not occur at any time. *
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Editor: Erafzon Saptiyulda AS
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