Rupiah will begin to reach stability in the second quarter of 2015 after the increase in the prices of subsidized oil fuels (BBM) will have its impact on oil and gas import and an increase in Bank Indonesia benchmark interest rate (BI rate) up to 8.2Jakarta (ANTARA News) - Economist from Standard Chartered Bank Fauzi Ichsan predicted rupiah will remain weak against the US dollar until mid 2012 at the level of around 12,500 per US dollar as a result of the improvement of the US economy.
"In 12-18 months, the US dollar will continue to gain in the global market as the Fed is expected to raise its benchmark interest rate to follow the improvement of the US economy," Fauzi predicted here on Thursday.
He said the rupiah will begin to reach stability in the second quarter of 2015 after the increase in the prices of subsidized oil fuels (BBM) will have its impact on oil and gas import and an increase in Bank Indonesia benchmark interest rate (BI rate) up to 8.25 percent.
"Rupiah would be stable at the level of 11,900 per dollar, but before than rupiah value would fall in short term to 12,500 per dollar AS," said the Managing Director of the Indonesian unit of Standard Chartered Bank.
He said improved US economy and potential increase in the FED interest rate in the second half of 2015 would force developing countries to raise their benchmark interest rates to tighten bank liquidity.
"We could imagine that the banking liquidity would be tighter to follow the rise in interest rate in order to remain competitive. Indonesia, despite fiscal stimulus will suffer the impact of an increase in the BI rate," he said.
Earlier Finance Minister Bambang Brodjonegoro said the government would not change the target for rupiah exchange rate of 11,900 per dollar in the revised 2015 state budget.
The decision is based on the US economic condition, which is now in the process of recovery that the FED is expected to soon raise its benchmark interest rate from 0.25 percent to 0.75 percent.
Meanwhile, in interbank transaction on Thursday, the rupiah traded at the level of 12,303 per dollar gaining from earlier level of 12,338 per dollar.
"The US dollar weakened on profit taking after the dollar index rose quite high," analyst of Monex Investindo Futures Zulfirman Basir said.
The profit taking action, however, was short term as there were still fears of continued Chinese economic slowdown political risk in Greece.
"The rupiah returning to the negative territory is quite possible," Zulkirman said.(*)
Editor: Heru Purwanto
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