President Susilo Bambang Yudhoyono has ordered the central bank to bolster the value of the rupiah to bring it nearer to 11,000 and prevent it from depreciating further.
Having depreciated by around 15 percent last year, the rupiah has been moving toward 12,000 a dollar since the start of the year, once actually breaching that level on Feb. 2, according to Bloomberg.
“I sent a message to the Bank Indonesia governor to protect the rupiah. It needs to be guarded from depreciating further so that businesses can do their business calculations,” Yudhoyono said Thursday at an industrial site in Karawang, West Java, near Jakarta.
The rupiah closed 0.7 percent lower Thursday to 11,750 a dollar from the previous day close.
“BI has cut its rate to 8.25 percent. That’s a good trend. And Pak Boed [BI governor Boediono] also needs to guard the rupiah — no more depreciation,” Yudhoyono said.
Bank Indonesia has been actively supporting the local currency in the market.
The rupiah, like the currencies of many other currencies, took a hit from the deepening global economic meltdown as funds were pulled out from emerging markets.
In Indonesia, the concern for the currency is exacerbated by the declining trend in foreign exchange reserves and has the potential to become even lower as the country’s exports have been hammered by rapidly decreasing global demand.
By January, foreign exchange reserves stood at US$50.9 billion, lower than $51.64 billion a month earlier.
According to Bloomberg, since last July, the country’s forex holdings have slumped by $10 billion.
The Central Statistics Agency (BPS) reported earlier in the week that the country’s exports in December were down by 20 percent from a year earlier amid weaker demand and lower prices of key global commodities.
Finance Minister Sri Mulyani Indrawati also mentioned during a hearing with legislators that the rupiah this year will likely hover around 11,000 per dollar, which she called the new equilibrium level.
Also speaking before lawmakers, Bank Indonesia senior deputy governor Miranda S. Goeltom said that the 11,000 target level was fairly realistic, although several factors could pose a threat.
“The global economic prospect, commodity prices, the continued consolidation of the financial market, and the dynamics of politics during elections are predicted to affect the rupiah throughout 2009,” Miranda said.
Yudhoyono said the depreciating rupiah was not an isolated case.
“With regard to currencies and stocks, the correction is happening worldwide, although to different degrees,” he said, adding that the central bank needed to always ensure the stability of the rupiah.
taken from: jakartapost