How to strengthen the rupiah

How to strengthen the rupiah

There is little the monetary authority can do to support the rupiah. The point is that aside from the fact that it doesn't have the money, the downside of the currency is caused mainly by political factors. Any act of intervention by Bank Indonesia (BI) would be like adding water to the ocean.

In that context it is understandable that BI has chosen to let the market decide the value of the rupiah against the U.S. dollar. After all, the government, possibly with the help of the political elite, need only send out some positive signals and let the market correct itself. The question is, does everyone want a stronger rupiah?

Since the 1990s the rupiah has become an exotic currency traded in Singapore, London and New York. Singapore has even established itself as the center of the speculative trade in the rupiah. Motives for speculation in the rupiah are not only economic, but also to hinder the performance of Gus Dur's (President Abdurrahman Wahid's) government.

Remaining calm is the best answer to the rupiah's current downside. We must learn from the mistakes we made at the beginning of the current economic crisis. The President and his team, however, should also do their best to pounce on any effort to weaken the government's performance, whether this is done by verbal means or by other means.

-- Bisnis Indonesia, Jakarta