Triggers for US Dollar Surge to Rp18,000 According to Business Leaders

The Chairman of the Indonesian Exporters Association (GPEI), Benny Soetragno, has shared his perspective on the causes behind the weakening Rupiah against the US Dollar. According to him, the depreciation is driven by sentiments regarding several factors, such as Indonesia’s increasing import data and concerns over rising benchmark interest rates. This stems from persistent inflationary pressures in the US remaining above the 2% target, leading to predictions that the US Federal Reserve will raise interest rates again.

“The Rupiah exchange rate against the USD is already influenced by perceptions. Some data supports this; for instance, our imports are increasing using USD. Because of inflation in the USA, the FED will raise lending rates, causing the USD to return home,” said Benny via a short message on Thursday.

Benny noted that while this condition remains advantageous for export-oriented entrepreneurs using domestic production, businesses are currently preparing by strictly managing their cash flow.

Separately, the Chairperson of the National Leadership Council of the Indonesian Employers Association (APINDO), Shinta Kamdani, assessed that the weakening Rupiah is already being felt in the real sector. She noted that for the business world, the primary challenge is not just the exchange rate level itself, but the impact on production costs, financing costs, and business certainty. This is particularly critical as 70% of the industrial sector relies on imported raw materials.

Consequently, the weakening Rupiah directly increases the cost of goods sold, narrows business margins, and reduces the capacity for companies to expand. Shinta detailed that significant pressure is being felt by the textile and textile products, chemical and petrochemical, plastic, basic metal, electronics, and automotive industries, among various other sectors that rely on imported components within their production chains.

Furthermore, Shinta explained that the business community has undertaken various mitigation steps to address the impact of the exchange rate depreciation. “Many companies are choosing to implement operational efficiencies, hiring freezes, controlling non-essential costs, delaying expansion and new investments, diversifying markets, strengthening the use of local raw materials, and employing hedging strategies to manage exchange rate risks,” she said. She added that businesses are currently focused on maintaining business continuity and preserving employment amidst rising cost pressures.