Recent drop in rupiah rate normal: Official
Recent drop in rupiah rate normal: Official
JAKARTA (JP): Bank Indonesia Governor J. Soedradjad Djiwandono said yesterday that the sharp drop in the rupiah rate against the U.S. dollar earlier this week was not caused by worsening fundamentals of the country's economy.
"It is normal for the rupiah to fluctuate. It sometimes rises and sometimes falls," he told reporters.
Soedradjad said that the demand for rupiah, which increased sharply in early February, dropped last week, causing its value to decline against the U.S. dollar by 16 points, or nearly one percent.
In the last two weeks, most commercial banks have bought a higher amount of rupiah to raise their reserves by one percentage point to three percent as required by the central bank's latest ruling, he said.
In addition, many commercial banks have kept more rupiah to anticipate the higher withdrawals before the Idul Fitri and Chinese new year celebrations.
"The banks reduced their rupiah liquidity after the holidays. This consequently pushed down the value of the rupiah," he said to explain the drop in the rupiah over the last two weeks.
He said that the 16-point drop in the rupiah's value was not something to be worried about because the fall was still much lower than the intervention band of the rupiah's exchange rate against the dollar.
The rupiah strengthened yesterday on the spot market, rising by two points to a range of Rp 2,313 and Rp 2,315 as more foreign companies sold their dollars on a profit taking, money market dealers said.
When asked to comment on the poor ratings assigned by Moody's Investor Service to the financial strength of the country's state-owned banks, Soedradjad said many overseas banks also received the same grade.
"If the banks still have problem loans, we could not, of course, expect higher rates," he said.
A senior executive of the state-owned Bank Rakyat Indonesia said last week that Moody's low state-owned bank ratings were not fair because the U.S.-based rating agency's assessment did not cover the government's strong support of the state-owned banks' operations.
In its Bank Financial Strength Rating (BFSR) issued recently, Moody's assigned a "D plus" grade to Bank Negara Indonesia, the largest of the seven state-owned banks. Bank Tabungan Negara (BTN) and Bank Ekpor Impor Indonesia (BEII) also received "D plus" ratings, while Bank Rakyat Indonesia (BRI) and Bank Dagang Negara each received an "E plus". The other two banks, Bank Bumi Daya (BBD) and Bank Pembangunan Indonesia (Bapindo), received "E" ratings.
The BFSR was only introduced by Moody's late last year to assess the actual or intrinsic strength of a financial institution.
Moody's financial strength ratings, issued to supplement the service's credit risk ratings, were received negatively in China, Hong Kong, Japan and the United States.(pwn/hen)