No uplift in long term for hard-hit rupiah

In his meeting with lawmakers on the proposed 2014 state budget on Wednesday, Bank Indonesia (BI) governor Agus Martowardojo said that the Indonesian rupiah could hover at between 10,500 and 10,700 throughout next year.

Such a forecast was more pessimistic than the government’s. At the same meeting, Finance Minister Chatib Basri told lawmakers that the rupiah would average 10,000 to 10,500 throughout next year, weaker than the 9,750 per dollar assumption in the 2014 state budget unveiled by President Susilo Bambang Yudhoyono on August 16.

“Our currency rate forecast of 10,500 to 10,700 per dollar is based on our study of what will be happening globally and domestically,” Agus told reporters after the meeting. “The global economy will recover next year, but there’s still a possibility that the US will scale back its monetary stimulus, which will certainly affect Indonesia,” he said.

A potential scaling back US quantitative easing has led to fund outflows from emerging economies, putting severe pressure on their currencies. 

US Federal Reserve officials have confirmed they are “comfortable” with the plan, which has triggered a rout among currencies throughout Asia and other emerging markets. 

Bloomberg data shows that the rupiah hit a four-year low of 10,955 on Wednesday at the same time as the Philippine peso and Malaysian ringgit traded near their three-year lows. India’s rupee recorded the steepest drop in 20 years.

The rupiah is among the currencies heaviest hit by the fallout, having depreciated by 10.8 per cent since the beginning of this year, according to BI data.