Bank Indonesia says stronger rupiah not a threat to export
Bank Indonesia says stronger rupiah not a threat to export
The Jakarta Post, Jakarta
Bank Indonesia Governor Sjahril Sabirin said on Friday that the
current sharp appreciation in the rupiah against the U.S. dollar
would not threaten the competitiveness of the country's export
products overseas.
Therefore, the central bank would not try to put a brake on
the appreciation trend because a stronger local currency would
help Bank Indonesia ensure monetary stability, he explained.
He said that what the central bank wanted to avoid was a sharp
fluctuation in the exchange rate.
"I don't think it will hurt exports. So far, there's no
complaints from exporters. The current rate is still tolerable,"
he told reporters.
The rupiah has strengthened sharply during the past couple of
weeks, appreciating to a 10-month high of Rp 8,630 per dollar
earlier this week. This may create concern among exporters as a
much stronger currency would make Indonesia's export products
relatively more expensive compared to products coming from other
countries whose currencies were weaker or do not appreciate as
fast as the rupiah.
Asked at what exchange rate level the appreciation would start
to endanger exports, he said: "It varies, depending on the type
of export products and the condition of the exporters. But in
general, an exchange rate level of around Rp 8,000 is still
okay."
The central bank is targeting an average exchange rate of
around Rp 9,000 for this year.
The sharp appreciation of the rupiah has allowed Bank
Indonesia to further cut its benchmark interest rate, as a
stronger rupiah helps lower inflation.
The interest rate on one-month Bank Indonesia SBI promissory
notes is currently at around 11.28 percent compared to around 13
percent at the beginning of this year.
The lower interest rate environment is not only expected to
push more bank lending to the real sector, but would also help
ease the burden of the government in covering the interest rate
of huge government bonds.
Currency experts have said that the influx of foreign funds
into the country had been the major factor in boosting the
exchange rate of the rupiah.
The money coming from overseas had been attracted to invest in
both government bonds and local corporate bonds which promise
higher returns compared to overseas bonds.
The planned sale of assets under the Indonesian Bank
Restructuring Agency (IBRA) has also prompted investors to change
their dollars into rupiah to purchase the assets.
At the same time, demand for dollars at home has been low,
while other currencies had also been strengthening against the
dollar.
Analysts, however, warned that since there was no significant
improvement in the country's economic fundamentals yet, the
central bank should always be alert as the foreign money could
easily run away, thus risking a plunging currency.
The rupiah ended slightly lower Friday as market participants
bought dollars ahead of the weekend, dealers said.
The rupiah closed at Rp 8,740 per dollar, down slightly from
Thursday's close at Rp 8,730.