Strong Rupiah Is Good For Indonesia, BI Says

Indonesia’s central bank forecast the rupiah to trade below the 9,000 level against the dollar next year, which would be stronger than the expected average level this year, a bank official said.

“The rupiah is expected to trade in the area of 8,900 to 9,000 against the dollar,’’ Hartadi A. Sarwono, a deputy governor of Bank Indonesia, said on Monday.

Hartadi, speaking at a seminar organized by Bank Negara Indonesia and Kompas newspaper in Jakarta, said the rupiah is expected to trade at 9,100 against the dollar this year. His comments suggest that the central bank will move to safeguard the rupiah from decline against the American greenback in 2012.

The central bank’s expected trading level for next year is lower than the 8,800 level assumed by the government in its state budget. The exchange rate is one of seven factors the government considers when it calculates its budget, along with economic growth, the inflation rate, the oil price and oil production.

“The rupiah will not be moving far from 8,900. It will hover around that level,” Hartadi said.

While a strong rupiah lowers the cost of imported goods, it also reduces the competitiveness of Indonesian goods overseas.

Hoping to keep the currency trading around Rp 9,100 against the dollar by the end of this year, Hartadi said the central bank will intervene in the market by selling dollars for the rupiah. The rupiah closed at 9,085 on Monday, compared to 9,040 on Friday.

“BI intervention in the bond market to counteract upward pressure on yields from capital outflows has been very effective in supporting confidence and reducing volatility across the term structure,” DBS Group in Singapore said in a report on Monday.

The rupiah has fallen 1.35 percent against the dollar this year, making it the fifth-worst performing currency in the Asia-Pacific region outside of Japan, according to Bloomberg. That compares with the 3.1 percent decline of Malaysia’s ringgit and the 3.5 percent slide in Thailand’s baht.

Foreign investors have unloaded their rupiah-denominated assets in favor of the dollar, which seems safer, Hartadi has said in recent weeks.

“The US dollar remains the safe haven,’’ he said.

Still, Hartadi said, lending by the country’s 120 commercial banks is forecast to grow 27 percent next year, compared with a growth target of 24 percent this year. Loan investment rose 31 percent in October from a year earlier, central bank data shows.

Bank Indonesia has called on commercial banks to boost lending in a move to spur domestic economic growth. The central bank cut its economic growth forecast for next year to 6.3 percent from its original forecast of 6.7 percent, reflecting concerns of a global economic slowdown.

Indonesia’s economy, which grew 6.1 percent last year, is forecast to grow 6.5 percent this year.

“This growth level is supported by strong domestic demand and export performance,’’ the central bank said in a statement on Thursday after maintaining its key interest rate at a monetary policy meeting. It reduced the rate in November and October.

Private consumption, which accounts for around two-thirds of Indonesia’s $700 billion economy, remains the main drive for the country’s economic growth.

 

 

http://www.thejakartaglobe.com/business/strong-rupiah-is-good-for-indonesia-bi-says/484290

 

 

Indonesian rupiah expected to strengthen further in 2012, it was placed below Rp. 9000/USD a few months ago and now weakened. What kind of impact do you think the strong rupiah in 2012 will give to FDI? Will you expand your business here and enjoy the benefit of strong rupiah? or do you think the currency will fall back to around Rp. 9800 – Rp. 10500 per USD so you won’t invest in the country?

It is 19 days away to 2011, have you made your new year resolutions yet? Christmas came early for some of us, and some might still be waiting their “Christmas” next year. How about your investment? Still clinging into Dollars? Or the recent-plunge-gold? or maybe in any currency that you think will strengthen further (Chinese Yuan maybe)?

 

 

Cheers!

~ by extendasia on December 13, 2011.

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