... competition is quite sharp in the presidential race. It affects the exchange rate although there is also seasonal factor in June... "Jakarta (ANTARA News) - Bank Indonesia (BI) said it will be ready in the market to protect rupiah stability amid the high volatility in exchange rate ahead of the presidential election on July 9.
"The competition is quite sharp in the presidential race. It affects the exchange rate although there is also seasonal factor in June ," Agus Martowardojo, the central bank governor said here on Friday.
Agus said the declining trend of rupiah lately was temporary because it happens when it was time for the government to repay its foreign debts, and there were repatriation of profit of foreign companies, payment of dividends and payment of loan interest.
In addition the foreign exchange market was also under pressure of imbalance between supply and demand for the US dollar, he said.
However, there was positive sentiment with the decision of the Constitutional Court ruling that there will be only one round of presidential election.
Earlier economic observer Aviliani from EC Think said the presidential election has no effect on the rupiah stability.
"I think we should not blame the election. What we need is to strengthen our economic fundamentals," Aviliani said.
She said rupiah would continue to weaken until the US government tapering off is completed.
Investors have calculated their move until there would be no monetary stimulus, she said on Thursday night.
"Investors would wait until the process of tapering off is over before they came back to invest in Indonesia," she said.
Even now foreign funds continue to flow into the country but the inflow is not as strong as the market expected, she added.
"Unfortunately we always depend on hot money," she said.
However, the government has to continue with its program for infrastructure development to keep the economy growing, she said.
"Rupiah weakens as a result of infrastructure development, but it is a risk that has to be faced," she said.
She suggested that the government consider seeking standby loan to strengthen its dollar reserve instead of curbing domestic demand.
"Curbing demand (for dollar) to strengthen rupiah would not solve the problem," she said.
Editor: Ade P Marboen
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