"What is happening now is not about fundamental issues, but global issues as balance has been disrupted due to the Chinese yuan's devaluation," Brodjonegoro explained.Jakarta (ANTARA News) - Finance Minister Bambang Brodjonegoro has blamed a possible currency war as one of the causes for the current depreciation of the countrys rupiah.
"It has been difficult for the rupiah to appreciate because other currencies are depreciating," he said, after attending a parliamentary meeting.
The minister explained that the potential for a currency war starting was real, following the devaluation of the Chinese yuan and the Vietnamese dong, and that these external pressures had indirectly affected the rupiahs performance.
"What is happening now is not about fundamental issues, but global issues as balance has been disrupted due to the Chinese yuan's devaluation," Brodjonegoro explained.
He admitted that the rupiah has been undervalued, but said the situation was still under control because the government and Bank Indonesia had continued to defend the rupiah so that it would not fluctuate too much against the US dollar.
"Indeed, the rupiah has been undervalued and so it must be strengthened," he said.
The minister, however, said that in the midst of growing global pressure, the rupiah exchange rate might not be too strong because if it was too strong, it would be counterproductive against existing conditions.
"If the rupiah is strengthened too much and becomes stronger against all currencies, it will affect competitiveness," he stated.
The rupiah exchange rate has hovered around Rp13,800 and was pegged at Rp13,400 and Rp13,500 when China had not devalued its currency by up to 4 percent.
The rupiah exchange rate has had the opportunity to strengthen during the past few days because the US dollar depreciated a little more due to markets anticipation of the Feds possible decision to adjust its interest rate in September.(*)
Editor: Heru Purwanto
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