Monday, 08 June 2020 09:07

Rupiah Keeps Strengthening Amid Covid-19 Pandemic

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Bank Indonesia –BI is optimistic that the rupiah will continue to strengthen even though Covid-19 pandemic is not over. The rupiah exchange rate at the close of trading last Friday (5/6) rose 1.54% to a level of Rp 13,877 per US dollar. According to Governor of BI, Perry Warjiyo, the rupiah has the potential to continue to strengthen due to inflation and low interest rate trends. In addition, the current account deficit continues to decline. Foreign capital flows also continue to enter; thereby this supports the strengthening of the rupiah. The central bank noted that the foreign capital inflow into Indonesia reached  Rp 7 trillion in the first week of June. Funds from these foreign investors enter through the portfolio of Government Securities. Perry also said that On one hand, the trend is getting better. On the other hand, Indonesia's risk premium indicator or Credit Default Swap-CDS declined. At present, Indonesia's CDS is at the level of 126. It is still high, but when Covid-19 was rampant it touched 245 with a rupiah exchange rate of Rp 16,600 per one dollar in March. Before the pandemic, it was recorded on the range 66-68.

Strengthening the rupiah exchange rate is also supported by good coordination between the government and Bank Indonesia. Thus, foreign investors also have confidence in the domestic financial market.

Another factor driving the strengthening of the rupiah is the current condition in the United States, which is being hit by Covid-19 outbreak  and large-scale demonstrations. According to INDEF Economist Bhima Yudishtira, the rupiah was quite benefited from the protests in the USA. Demonstrations of solidarity with the death of George Floyd and other African Americans in the hands of  US police have occurred in many places in the USA over the past week. Some protests even turned into riots and clashes with law enforcement officers. This makes the situation in the USA worse. The relations between the United States and China are heating up again, and President Donald Trump's attitude towards the World Health Organization (WHO) makes the global market players leave the dollar. The weakening of the US dollar makes foreign funds flow into promising countries, including Indonesia. This makes the rupiah strengthen even though the Covid-19 pandemic has not ended yet in this country

Read 153 times Last modified on Monday, 08 June 2020 13:24