Amid dollar strength, the Finance Minister of Indonesia expects upside bias in stable rupiah exchange rate

Sri Mulyani Indrawati, on Tuesday, declared that the rupiah exchange rate is expected to remain stable, with a notable upside bias.

In a reassurance to financial markets and the public, Indonesia’s Finance Minister, Sri Mulyani Indrawati, on Tuesday declared that the rupiah exchange rate is expected to remain stable, with a notable upside bias. This optimistic outlook stems from the observed easing of pressure resulting from the strength of the dollar.

Sri Mulyani, the Finance Minister of Indonesia, conveyed this positive sentiment during a press conference in her capacity as the chair of Indonesia’s Financial System Stability Committee. The committee, a collaborative effort that brings together key institutions like the finance ministry, the central bank, the Financial Services Authority, and the deposit insurance corporation, plays a pivotal role in monitoring and ensuring the stability of the financial system of Indonesia.

The dollar’s strength had generated uncertainties and fluctuations in exchange rates, prompting stakeholders to closely monitor the situation. But recently the U.S. currency has begun to lose some of its shine on expectations the Federal Reserve will quickly start to cut interest rates. Minister Sri Mulyani highlighted the concerted efforts of the committee in closely monitoring economic indicators and implementing measures to safeguard the stability of the rupiah. She emphasized that the pressure from the strong dollar, which had previously posed challenges, has now started to ease, paving the way for a more stable exchange rate.

The rupiah advanced 0.16% to 15,780 against the dollar by 04:34 GMT, becoming the strongest level in the last four days. The Bank of Indonesia (BI) views the strengthening of the rupiah in the second half of 2024. Perry Warjiyo, its governor said at the same press conference that to stabilize the rupiah, the central bank will continue to intervene in the foreign exchange market. A stable exchange rate provides a predictable environment for trade and investment, reducing risks associated with currency fluctuations.

Around 8.8 trillion rupiah ($557.49 million) worth of bonds has been bought by the BI so far in the year 2024. As expected by Sri Mulyani, Indonesia’s economic growth last year was around 5%. On February 5 the official 2023’s economic growth data is set to be released by the Statistics Bureau of Indonesia.

The collaborative approach aims to address challenges promptly and implement strategic measures to mitigate potential risks. The assurance of a stable rupiah exchange rate with an upside bias reflects the government’s commitment to fostering a robust and resilient financial environment amid changing global economic conditions.