US policy change puts pressure on rupiah: BI
REPUBLIKA.CO.ID, JAKARTA — The pressures on stability, particularly of the Rupiah exchange rate, tend to originate from policy change in the United States. It affected all countries, according to Bank Indonesia.
A higher expectation of policy rate hike in the US is also attributed to the fiscal deficit, which is predicted to reach around 4 per cent of GDP this year and 5 per cent of GDP in 2019.
“The economic gains and rising inflation in the United States are placing added pressure on the Federal Reserve to hike the Federal Funds Rate (FFR), with some market players expecting aggressive hikes up to four times this year,” said the Bank Indonesia Governor, Perry Warjiyo, in a statement here on Thursday.
Those two policy changes have sparked a vertiginous increase in the US Treasury Bond yield and US dollar appreciation against nearly all global currencies. Global financial market uncertainty has also escalated, triggered by the looming US-China trade war, coupled with simmering regional geopolitical tensions.
Prevailing global developments have prompted a foreign capital outflow and amplified pressures on financial markets in advanced economies and emerging market economies (EMEs), including Indonesia, manifesting in lower stock prices, higher bond yields and exchange rate depreciation against the US dollar.
Indonesia¿s economy remains considerably resilient to external pressures, as effectively demonstrated in previous periods of global shocks.
President Joko Widodo earlier said fluctuations of currencies including the rupiah against the U.S. dollar was a global phenomenon faced by almost all countries.
He had asked the Coordinating Minister for Economy and the Finance Minister to take concrete steps to control rupiah fluctuations.
The President said he appreciated the steps taken by Bank Indonesia to forestall impact of the fluctuations. “I believe Bank Indonesia has taken the right steps with its monetary policies,” he said.
The government itself continued to prepare steps within its area or authority to help Bank Indonesia to prop up the rupiah, which had lost much its value against the dollar over the past month, he said, adding he was pleased to note that thanks to the steps taken, the Rupiah began to regain some of its losses in value lately.