BANK Indonesia (BI) said it stands ready to act to steady the rupiah from excessive volatility as Donald Trump’s early lead in the US presidential race spurs US dollar strength.
“BI will always monitor the exchange rate movement of the rupiah and other currencies, and will certainly make various efforts to stabilise the exchange rate if there is an excessive increase in volatility,” Fitra Jusdiman, its director for monetary and securities asset management, said on Wednesday (Oct 6).
The central bank will deploy its so-called triple intervention, targeting the FX spot, domestic non-deliverable forward and secondary government bond markets, he added.
The rupiah has slumped 0.6 per cent on Wednesday morning trading to 15,828 against the US dollar, its weakest level in nearly three months. Jusdiman said the depreciation is “relatively in line” with forecasts and the movement of most Asian currencies as Trump leads the vote count.
“BI has anticipated various scenarios of the US presidential election results and has also prepared mitigations for their potential impacts,” he said.
It underlines how the US election – and the currency volatility it’s spurred – could complicate the monetary policy easing path for emerging markets. The rupiah has fallen 4.4 per cent this quarter amid concerns that a Trump presidency could usher in higher tariffs that could dampen global growth.
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Citigroup and Barclays are among those seeing a higher chance BI could put its easing campaign on hold yet again at its Nov 20 meeting. That’s despite steadily declining inflation, a struggling manufacturing sector, and economic growth coming in at a one-year low.
“BI has in the past two meetings mentioned that growth ‘needs to be supported’ but interest rate policy still hinges largely on the balance of payments outlook – which currently is driven more by global market developments, especially awaiting the outcome of US election,” Citi economist Helmi Arman wrote in a note on Tuesday. He expects the next 25-basis point cut in December.
While BI has offered incentives to spur bank lending to labour-intensive sectors in the meantime, PT Bank Maybank Indonesia said a rate pause cannot go on for too long if policymakers are concerned about growth.
“A significantly lower BI rate will support domestic demand activities that have substantial impacts for the economy,” it said in a note. BLOOMBERG
