Jakarta: Bank Indonesia (BI) Governor Perry Warjiyo on Thursday said the Rupiah has succumbed to depreciatory pressures in May 2019 due to the impact of global uncertainty and the seasonal spike in demand for foreign exchange.
After appreciating in April 2019, the Rupiah fell 1.45 percent (ptp) as of May 15, 2019 compared with the rate recorded at the end of April 2019 or by 1.36 percenton the April average.
"The weaker Rupiah in May 2019 stems from negative global sentiment surrounding the recent escalation of the trade war, which has amplified currency pressures in developing economies, including Indonesia," he said.
"Additionally, a seasonal increase in demand for foreign exchange for non-resident dividend payments also hampered Rupiah exchange rate performance," he said.
Nevertheless, BI predicts Rupiah stability moving forward with market mechanisms maintained in line with the promising BOP outlook for 2019.
Moreover, BI will continue to accelerate financial market deepening, targeting the money market and foreign exchange market in particular, in order to increase the effectiveness of exchange rate policy and strengthen domestic financing
BI decided to hold its 7-Day Reverse Repo Rate at 6.00 percent after a Board of Governors meeting on May 15-May 16, 2019. The central bank also decided to maintain the Deposit Facility (DF) and Lending Facility (LF) rates at 5.25 percent and 6.75 percent respectively.
According to the central bank, the decision is consistent with efforts to maintain the external stability of Indonesia’s national economy amidst the re-emergence of global financial market uncertainty. Moving forward, BI will remain vigilant of global financial market dynamics and external stability with due consideration to the space available for accommodative monetary policy in line with low inflation and the need to stimulate domestic economic growth.