BI sees potential for rupiah to strengthen

BI sees potential for rupiah to strengthen

Illustration: A clerk counts rupiah bills at Bank Mutiara in Jakarta. (Antara Foto / Yudhi Mahatma / ss / mes)

The rupiah exchange rate level is fundamentally undervalued. So, it has the potential to continue to strengthen and support economic recovery
Jakarta (ANTARA) - Bank Indonesia said there is more wiggle room for the rupiah to strengthen in the future as at the current exchange rate, it is still undervalued against the US dollar.


"The rupiah exchange rate level is fundamentally undervalued. So, it has the potential to continue to strengthen and support economic recovery," Bank Indonesia Governor Perry Warjiyo said on Tuesday in Jakarta.


The rupiah is still showing a rising trend because uncertainty in global financial markets has begun to subside and confidence in Indonesia's economic conditions has been maintained, Perry explained.


However, the strengthening of the rupiah is not only supported by the inflow of foreign capital into Indonesia, but also the availability of a large foreign exchange supply from domestic players, he added.


He said the rupiah has appreciated in April and May this year. As of May 18, 2020, the rupiah strengthened 5.1 percent on average and 0.17 percent point-to-point, compared to the end of April.


"However, the rupiah still recorded a depreciation of around 6.52 percent compared to the end of 2019 due to deep depreciation in March, 2020," Perry said.


To support the effectiveness of exchange rate policies, BI is continuing to optimize monetary operations to ensure the operation of market mechanisms and the availability of liquidity both in the money market and the foreign exchange market.


Earlier, BI had projected that the rupiah, at the end of 2020, could reach the range of Rp. 15,000 per US dollar through various monetary operations.


Meanwhile, the exchange rate of rupiah traded between banks in Jakarta on Tuesday afternoon (May 19, 2020) strengthened as the central bank set the benchmark interest rate.


The rupiah closed up 80 points, or 0.54 percent, at Rp14,770 per US dollar from Rp14,850 per US dollar.


PT TRFX Garuda Futures director Ibrahim Assuaibi pointed out the rupiah gained due to good news related to a vaccine for COVID-19 being produced by the Moderna biotechnology company in the US.


"This news certainly gives hope that the coronavirus can be overcome soon, and life will return to normal, and the economy will accelerate again. Market sentiment is improving and the rupiah is ready to triumph again," Ibrahim said. (INE)

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