KATADATA - Bank Indonesia (BI) sees that the rupiah appreciation in the last one week is more because of the movement in the foreign currency market, especially with those that are affected by the sentiments from the United States (US) economic data release as well as the release of meeting minutes of the Federal Open Market Committee (FOMC) during last September 16-17.
“So it is a market-driven thing, there’s an influence from the meeting minutes of The Fed that the US economic data is still weakening,” said the BI Deputy Governor Mirza Adityaswara in BI, Jakarta, Friday (9/10). And as the result, the central bank would not need to have the trouble to conduct intervention to strengthen rupiah. “We just help (intervene) a little to have a little boost of rupiah appreciation.”
And besides the external factor, according to the former Executive Head of the Deposit Insurance Corporation (LPS), the domestic factor also plays a great role in lifting rupiah up to where it is now to become the currency with the highest appreciation in Asia region. This is especially because of positive responds from the market towards the government’s policy packages. “And not to mention that there will be the fourth package, which will boost the investment and foreign funding inflow as well as to boost the real sector that would absorb many labors,” Mirza said.
Rupiah on Friday’s trade has appreciated so very sharply again. In the spot market based on Bloomberg’s data, rupiah was closed in the position of 13,412 per US dollar, appreciated by 3.42% compared to the closure on Thursday. In a week, rupiah has appreciated by 1,279 points or 8.7%. It means that almost half of the rupiah weakening since the start of the year have been covered in just a week, which reached 18.6%. And now if this is calculated for this whole year, rupiah only depreciates by 8.27% against US dollar.
The rupiah appreciation, according to an economist of Indonesia University (UI) Anton Gunawan, is also because of several factors from within the country, especially with those that are related with the BI’s policy in the financial market, and regarding the foreign funding inflow information. Also the combination of several policies and occurrences in the last one-week has made rupiah to regain its strength. This sudden increase has made the foreign currencies market panic, which resulted in investors to let go of their assets in US dollar (cut loss).
The first domestic factor is there is a change of direction in BI’s policies in the foreign currencies market, which is by increasing the auction volume of foreign exchange swap. Initially, one of the BI’s policies that was announced last September 9 was to limit the auction of foreign exchange swap from twice a week to only be once a week with a fixed rate.
According to Anton, this step has disturbed the obligation market so that the yield level is increasing, since the investors begin to sell their obligation to get US dollar. And as the result, rupiah depreciates.
But lately, in the policy package that BI issued on last September 30, BI has corrected the policy. “It seems that BI realizes their mistakes and then enlarges the volume of foreign exchange swap so that the investors can enter and absorb rupiah and obligation again,” Anton said.
The second one is Pertamina’s and Perusahaan Listrik Negara (PLN)’s stes to reduce their demand in foreign currencies in the financial market, since both of the companies are the biggest US dollar users in the country. The two state-owned companies request their US dollar directly to BI, so that the dollar request in the domestic market shrinks. This condition is then used by BI to intervene the market, which caused rupiah to appreciate.
The third one is the rights issue of PT HM Sampoerna Tbk. worth around IDR 21 trillion or US$ 1.4 billion. The majority of the new stock buyers of the cigarette producer are the foreign investors. And as the result, there is a cash inflow from abroad that enters Indonesian financial market. This is even better with Pertamina as the largest US dollar consumer in the country to stop buying dollars in the spot market, which makes rupiah to appreciate even more.
The sudden increase has triggered panic in the market subjects that they immediately let their assets in US dollar go. “And that’s why there is a panic selling in US dollars, which makes rupiah to hike so very sharply,” Anton said.
The fourth one is the government’s step to have a standby loan worth US$ 5 billion from the Asia Development Bank (ADB). “The fund can be stored in the form of US dollar.”
The combination of external factors with the four domestic ones is the cause of rupiah to hike and appreciate so sharply in just this past one week.