Strategise During Rupiah Weakness: Avoid Rushing to Buy Dollars
JAKARTA — As the Rupiah has weakened recently, many individuals have been making financial errors in an attempt to protect their asset values. Several economists and financial planners suggest that exchange rate volatility often triggers emotional and risky financial decisions, ranging from hoarding dollars when rates are high to using emergency funds for speculation.
Common financial mistakes during Rupia weakness include panicking and converting all savings into US dollars. Josua Pardede, Chief Economist at Bank Permata, revealed that the most common error is converting entire Rupiah savings into US dollars once the exchange rate is already high. He noted that US dollar holdings should be adjusted based on actual needs; if income and expenses are primarily in Rupiah, holding excessive dollars becomes a risky form of speculation.
Pardede added that keeping money in banks remains safe, provided the banks are supervised by the Financial Services Authority (OJK) and deposits meet the guarantee requirements of the Deposit Insurance Corporation (LPS). Furthermore, OJK data indicates that the banking sector maintains adequate liquidity, with third-party funds growing by 13.55 per cent to Rp 10,231 trillion as of March 2024, and credit growing by 9.4 per cent to Rp 8,659 trillion.
Other frequent mistakes include using emergency funds to purchase risky assets, taking on debt to buy foreign exchange, delaying loan repayments in hopes of a better rate, or buying US dollars without a clear purpose. Pardede warned that the greatest risk during Rupiah weakness is not just the exchange rate, but the impact on monthly cash flow. As long as income remains in Rupiah, the priority should be maintaining emergency funds, paying instalments on time, reducing consumer debt, and postponing non-essential large purchases. He emphasised that emergency funds for 3 to 6 months should remain in Rupiah via savings accounts or deposits, as daily expenses are predominantly in Rupiah.
Similarly, Melvin Mumpuni, a financial planner from Finansialku, noted that many people deplete their emergency funds to buy US dollars or other assets out of fear of missing a market momentum. He stressed that emergency funds must be prioritised for urgent needs rather than being used for speculation during market volatility.