October 25, 2023
JAKARTA – The Finance Ministry aims to synchronize monetary and fiscal policies to prevent the rising United States dollar from jeopardizing the nation’s financial system.
The ministry is prepared to address the potential weakening of the rupiah’s exchange rate against the US dollar by implementing several mitigation measures, according to Finance Minister Sri Mulyani Indrawati.
“We will continue to synchronize monetary and fiscal policies so that in a situation where the driving force is a country like the US, we can mitigate and minimize the impact on the exchange rate, inflation, economic growth and financial system stability,” Sri said at the Presidential Palace complex on Monday.
The rupiah’s interbank exchange rate declined by 0.06 percent, from Rp 15,873 per US dollar to Rp 15,883 on Monday. The central bank’s Jakarta Interbank Spot Dollar Rate (JISDOR) exchange rate also weakened to Rp 15,943 from the previous Rp 15,856 per US dollar.
Sri noted that global market players currently perceive a long-term high in global interest rates, leading to the withdrawal of US foreign capital and a global strengthening of the dollar.
Market observer Ariston Tjendra noted that the rupiah has been trading above Rp 15,700 for the past seven days due to the US’ increasing interest rate policies, with a 4.9 percent yield rate for 10-year treasury notes.
“This increase in yields indicates market expectations that high interest rates will last longer to reduce US inflation, in line with the expectations of top US central bank officials last night, Christopher Waller and John Williams,” said Ariston.
There have been concerns about the continued strengthening of the greenback and its potential impact on energy spending in the State Budget (APBN). However, Sri stated it had not yet significantly affected the nation’s energy subsidy spending.
Sri Mulyani, also the chair of the Financial System Stability Committee (KSSK), said the government would monitor the Middle East’s geopolitical situation. The region is a global fuel-production hub, affecting supply chains and global prices.
“Oil prices, exchange rates, interest rates, we will see how we adjust APBN as we go,” she said.
PT Forexindo Futures Profit director Ibrahim Assuaibi has voiced his concerns that the Palestine-Israel conflict will contribute to the weakening of the rupiah. He said the involvement of surrounding countries might cause the dollar to “significantly strengthen.”
According to Ibrahim, if the rupiah continues to weaken, the US dollar could reach Rp 16,000.