Chinese Media Highlights Plunging Rupiah, Points to Culprit

Jakarta, CNBC Indonesia - China’s largest mass media outlet, Xinhua, has specifically highlighted the condition of the Indonesian currency after the rupiah exchange rate was reported to have weakened, breaching a new psychological level above Rp 18,000 per US dollar on Thursday morning. The fall of the Garuda currency occurred amidst high global uncertainty and the release of economic data from the superpower that was much stronger than market expectations. “The Indonesian rupiah weakened past the psychological level of 18,000 per US dollar on Thursday morning amid global uncertainty and stronger-than-expected US economic data,” the outlet stated in an article titled “Indonesian rupiah weakens beyond 18,000 per dollar”. “The currency fell 0.27% to 18,015 per US dollar, bringing its decline this year to more than 7%,” it continued. “Analysts said demand for the US dollar was supported by rising geopolitical tensions in the Middle East and solid US employment and services sector data, while domestic market sentiment remained sluggish,” the outlet further explained. It also quoted a currency analyst commenting that the rupiah could remain fluctuating in a range of 17,900 to 18,050 per dollar. It was stressed how Bank Indonesia stated that it would continue to take “consistent and measured” steps to stabilise the rupiah. “By optimising its policy instruments and maintaining adequate foreign exchange liquidity,” the outlet reported. The outlet also featured an article on how this depreciation is affecting business owners. An article titled “Rupiah weakness prompts Indonesian firms to cut costs, freeze hiring” was published. “The depreciation of the rupiah exchange rate is increasingly impacting the real sector, prompting companies to postpone expansion plans, limit non-essential spending, diversify markets, increase the use of local raw materials, and strengthen currency hedging strategies, an Indonesian industry organisation said,” the outlet wrote. “Businesses in Indonesia are implementing cost-cutting measures and freezing new hiring as the rupiah exchange rate weakens past 18,000 against the US dollar, said Shinta Kamdani, chairwoman of the Indonesian Employers’ Association (Apindo),” it stated. “The current challenge for businesses is the impact on production costs, financing, and business certainty, Shinta said, noting that around 80 percent of Indonesia’s raw materials are still imported.” Still citing Apindo, Xinhua mentioned how the weakening rupiah exchange rate has increased production costs, pressured profit margins, and reduced companies’ ability to expand. Industries heavily reliant on imported raw materials, including textiles, chemicals, petrochemicals, plastics, base metals, electronics, and automotive manufacturing, are among the hardest hit. “Shinta also mentioned high logistics, energy, and financing costs as additional burdens for businesses, while noting that manufacturing activity and business confidence have weakened in recent months,” the outlet added. “She warned that the current depreciation is deeper than that seen in the first quarter of this year, when some manufacturing sub-sectors had already recorded sluggish growth or contraction.”