Purbaya values strong fundamentals amid US dollar approaching Rp17,000

Jakarta — Finance Minister Purbaya Yudhi Sadewa believes the rupiah should strengthen given that Indonesia’s economic fundamentals demonstrate strong performance.

Meanwhile, the rupiah weakened 39 points, or 0.23 per cent, to Rp16,997 per US dollar at Monday’s market close, compared to the previous close of Rp16,958 per US dollar.

“When the economy is running fast, increasingly fast, fundamentals should be good. When normal, the rupiah should strengthen,” Purbaya told reporters at the office of the Coordinating Ministry for Economic Affairs in Jakarta on Monday.

However, he deferred intervention strategy to Bank Indonesia (BI) as the authority responsible for maintaining rupiah exchange rate stability.

He stated he would not comment further to avoid speculation about government intervention in monetary policy.

“I don’t know why the rupiah weakened. You should ask the central bank. Because the central bank has only one responsibility: maintaining exchange rate stability,” he said.

Pressure on the rupiah is attributed to increased demand for safe-haven assets amid geopolitical uncertainty.

Bank Indonesia’s Jakarta Interbank Spot Dollar Rate (JISDOR) also weakened to Rp16,990 per US dollar from the previous level of Rp16,934 per US dollar.

“Pressure on the rupiah stems primarily from US dollar strength in global markets, alongside increased demand for safe-haven assets amid geopolitical uncertainty, particularly the ongoing conflict in the Middle East,” said Muhammad Amru Syifa, Research and Development at Indonesia Commodity & Derivatives Exchange (ICDX).

Market participants are also monitoring relatively stable US inflation at around 2.4 per cent annually. This condition is deemed to support US dollar strength and place pressure on emerging market currencies, including the rupiah.

From the domestic front, the rupiah is still supported by relatively solid economic fundamentals, such as controlled inflation, maintained macroeconomic stability, and Indonesia’s trade balance performance, which continues to record a surplus.

To mitigate pressure on the rupiah, the government and Bank Indonesia are said to be able to continue strengthening policy coordination to maintain financial market stability, including through measured intervention in the foreign exchange market and ensuring sufficient dollar liquidity in the domestic market.