After constant fluctuations of its currency for past several days, the Indonesian Rupiah eventually reached its highest value in April 2020, when its rate was previously recorded in the range between 15,430 and 15,295 against US dollar.
It turned out that rupiah could show its strength when it hit its highest rate of 15,000 to the greenback as recorded on Thursday’s closing session of the Jakarta inter-bank market, not until the end of 2020 as expected by the Indonesian central bank’s Governor Perry Warjiyo.
The Indonesian central bank, Bank Indonesia, was optimistic that rupiah would strengthen to 15,000 per US dollar by the end of this year in line with the lender’s policy on efforts to stabilize the value of rupiah against foreign currencies including the US dollar, Warjiyo told journalists on April 7.
According to him, the central bank would continue to maintain and stabilize the value of rupiah at the current position or even higher by intervening in the spot market and buying state bonds on the secondary market.
He pointed out that some indicators showed the strengthening of the rupiah value including the high interests of domestic and foreign investors who buy state bonds on the market.
“The positive sentiment can be seen from the high number of bids on the state bonds which were valued at 44.4 trillion rupiahs (some 2.9 billion US dollars),” he told the press recently.
The indicators also include the prediction of the current account deficit which could be below 1.5 percent of the gross domestic product (GDP) in the first quarter of 2020, or lower than that in the previous estimation of 2.5 percent to 3 percent of the GDP.
In addition to those internal indicators, the external signs also give positive sentiments to the Indonesian currency including the strengthening of the futures trading in the United States and Europe.
Likewise, Bank Indonesia, the Financial Service Authority, the Coordinating Ministry for Economy and the Finance Ministry have been communicating with global investors to make them confident in Indonesia which remains strong amid the current COVID-19 pandemic as the country has been taking various measures including the fiscal stimulus to improve its economy.
A number of observers from several companies in the country agreed with Bank Indonesia and the government that the Indonesian currency would remain to stay at 15,000 rupiahs against US dollar or even stronger.
Among the observers is Director of a foreign exchange trading company PT TRFX Garuda Berjangka, Ibrahim Assuaibi, who said recently that the external positive sentiments on rupiah also include a question on the effectiveness of Gilead Sciences antivirus drug to cure the COVID-19.
However, he said, domestic sentiment is also able to make rupiah stronger against foreign currencies including the U.S. dollar.
According to him, the market has appreciated the government’s policy on prohibiting people from return to their hometowns for celebrating the Muslims’ post-fasting festivity Ied-al-Fitr.
“This gives fresh air to the Indonesian currency as the people abide by the policy. The homecoming for the Indonesian people, especially Muslims, is a transcendental importance,” he said, adding that the mixed polices made by Bank Indonesia and the government have regained the trust from the market.
Showing the same opinion with Assuaibi, Chairman of the Indonesian Chamber of Commerce and Industry (KADIN), Rosan Roeslani, said recently the Indonesian currency would continue to be at 15,000 rupiahs against the greenback at least until the end of 2020, or even stronger.
“I agree with Bank Indonesia that rupiah will stay at 15,000 against the U.S. dollar or even stronger,” he said.
However, he also called on Bank Indonesia and the government to take anticipatory measures on possible negative sentiment on rupiah as a number of companies still need foreign currencies.
Another factor comes from an international rating agency Fitch Ratings which has lowered the rate of 2020 Indonesian economic growth to 2.88 percent or lower than that in the previous year.