Weakening of rupiah not related to economic fundamentals

Weakening of rupiah not related to economic fundamentals

Hatta Rajasa. (ANTARA)

"The European situation is not getting any better, if not worse."
Jakarta  (ANTARA News) - Coordinating Minister for Economic Affairs Hatta Rajasa said the rupiah`s weakening against the dollar in recent weeks was not related to Indonesia`s economic fundamentals but was caused by the European crisis.

"It is temporary. It has nothing to do with our economic fundamentals," he stated here on Wednesday.

Hatta added the European economy had not shown signs of improvement, while the US economy had grown steadily, leading to the dollar`s appreciation against other major currencies.

"The European situation is not getting any better, if not worse. Greece has made no progress, while a number of large banks are facing liquidity problems. On the other hand, the dollar is strengthening, as the US economy is growing. So demand for dollar is on the rise," he explained.

The minister said the government had anticipated such a situation and asked the market to remain calm. Moreover, he added, Indonesia`s foreign exchange reserves currently stood at US$114 billion to 115 billion, which was enough to safeguard the country`s balance of payment.

"What is important is that we must stick to our promises. We must retain our regulations, which have been on the right track. There is no need to make changes or make the market nervous. The market need not be nervous. We remain confident about our economy," Hatta said.

"The government has a sound budget and a good fiscal policy, even though it cancelled a plan to raise the prices of subsidised fuels and global crude prices continued to increase," he added.

Meanwhile, the rupiah gained ground on Wednesday evening after coming under pressure in the morning. The local unit traded at Rp9,420 per dollar in the Jakarta interbank spot market at close on Wednesday, up by 150 points compared with the previous day`s close of Rp9,570 per dollar.