The recent rapid rise of the rupiah against the US dollar has drawn a mixed bag of responses from industrial players, but most of them agreed that currency stability was of paramount concern.
Hidayat Triseputro, the executive director of the Indonesian Iron and Steel Industry Association, said the rupiah’s appreciation would not benefit the steel industry because most companies imported raw materials under long-term contracts.
“We signed many import contracts last month when the dollar was worth more than Rp 10,000,” Hidayat said on Thursday.
“The contracts can’t be changed now, even though the rupiah has risen to Rp 9,390. This means that we are now paying more than we should have to.”
Hidayat said exchange-rate stability was the industry’s top concern.
However, the strong rupiah drew a more positive response from the pharmaceutical industry, which imports up to 90 percent of its raw materials, although again most executives stressed the need for stability.
“It’s good to see that the currency is stronger now,” Pharma Materials Management Club chairman Kendrariadi said on Thursday. “But it would be better if the government could stabilize the rupiah at some level, so we can forecast how much we have to spend on imports and calculate the prices of products.”
The reaction to the recent surge in the rupiah was less positive from the furniture industry, which is likely to see lower profits as its export products are typically priced in dollars.
“It was more profitable for us when the dollar was above Rp 10,000,” Ambar Tjahyono, the chairman of the Indonesian Furniture Industry and Handicrafts Association, said on Wednesday. The optimum exchange-rate level for the industry would be between Rp 10,000 and Rp 10,500 per dollar, Ambar said.
“Given the current situation, we’re losing 10 to 15 percent of our profits on export contracts,” he said.
David Sumual, an economist at PT Bank Central Asia, said that given the nation’s fundamentals and foreign-exchange reserves, the rupiah could rise to between Rp 9,000 and Rp 9,200 per dollar.
Bank Indonesia reported that foreign exchange reserves stood at $62.3 billion at the end of September, compared with $57.9 billion at the end of August. “The central bank seems to have been intervening in the market over the past few days to get a handle on the volatility,” Sumual said.
The rupiah’s rapid rise against the dollar has been due to inflows of short-term funds on the back of a significant interest-rate spread between the United States and Indonesia.
The US Federal Reserve’s key rate stands at 0.25 percent, while Bank Indonesia decided to keep its benchmark rate on hold at 6.5 percent on Monday.
“Risk appetite has increased, so money is flowing from developed economies to emerging ones,” Sumual said.
“Although stocks have declined over the past few days, money is still flowing into safe options like government bonds and Bank Indonesia certificates.”
The rupiah traded at 9,425 per dollar as of 4:25 p.m. in Jakarta on Thursday, from 9,429 late on Wednesday, according to data compiled by Bloomberg.