The rupiah under pressure

The rupiah under pressure

The weakening of the rupiah against the U.S. dollar in the
last few days has been discussed widely. This is because over the
past weeks the currency had shown itself to be quite capable of
holding its ground against the greenback. People had begun to
believe the rupiah would stabilize below the Rp 8,500 per dollar
level.

Maintaining a stable currency is no easy task. This holds
especially true for a currency like the rupiah, which has no real
support aside from the government's signaled commitment to fix
the economy.

Malaysian Prime Minister Mahathir Mohammad's manner of
preventing speculation has seen no success so far. In its efforts
to defeat the crisis, Kuala Lumpur smartly rejected aid offers
from the IMF and the World Bank. Malaysia imposed controls on its
currency instead and the Malaysian ringgit escaped speculator
action.

Indonesia cannot follow that example as the country is already
committed to both the IMF and the World Bank. Furthermore, many
parties in this country either have an interest in supporting a
free market policy, or the concept appeals to them on academic
grounds.

Bank Indonesia had planned to monitor foreign exchange
movement last month, but the plan had to be suspended as the
draft law regulating the procedure has not yet been submitted to
legislators. Such a monitoring system would at the very least
provide better information to the monetary authorities.

-- Bisnis Indonesia, Jakarta