BI: Rupiah Still "Undervalued", Poised to Strengthen Ahead

Jakarta (ANTARA) - Bank Indonesia Governor Perry Warjiyo stated that the current exchange rate of the rupiah against the US dollar is undervalued, or below its fundamental value. “Firstly, the current exchange rate is undervalued, and in the future, we are confident it will stabilise and strengthen,” said Perry Warjiyo after a limited meeting with President Prabowo Subianto at the Presidential Palace Complex in Jakarta on Tuesday. Perry explained that Indonesia’s current economic fundamentals are actually very strong to support the exchange rate. This is reflected in economic growth reaching 5.61 per cent and inflation remaining low. Other strengthening indicators include high credit growth and adequate foreign exchange reserves. Perry emphasised that these fundamentals indicate that the rupiah should be stable and tend to strengthen in the market. However, Perry did not deny the existence of short-term pressures causing the Indonesian currency to weaken. According to him, there are two main factors influencing this: global factors and seasonal factors. The global factors pressuring the rupiah include high world oil prices and the rise in US interest rates. Currently, the 10-year US Treasury yield has reached 4.47 per cent, triggering a broad strengthening of the US dollar. “The Coordinating Minister mentioned the capital flight from emerging markets, including Indonesia,” said Perry, referring to the impact of global interest rate dynamics. In addition to global factors, seasonal pressures during the April to June period have increased domestic demand for US dollars. This foreign exchange need has surged for dividend repatriation payments, debt payments, and the costs for Hajj pilgrims. At the close of trading today, the rupiah exchange rate was recorded weakening by 30 points or 0.17 per cent to Rp17,424 per US dollar from the previous close at Rp17,394 per US dollar.