The Indonesian Rupiah's Lag Behind Other Asian Currencies

The depreciation of the US dollar against major world currencies has been leveraged by most Asian currencies to strengthen throughout this year. Continued economic growth in Asia, and its role as a global economic engine, has led to a renewed inflow of foreign funds into the region.

Similarly, the Indonesian Rupiah has also strengthened against the US dollar. In the Jakarta Interbank Spot Dollar Rate (JISDOR), the Rupiah strengthened by 130 points to Rp 13,154 per US dollar from the previous closing of Rp 13,284. According to Bloomberg data, as of 12:05 WIB on Monday, September 11th, the Rupiah was traded at 13,162 per US dollar, representing a strengthening of 23 points (0.18 percent) from the previous weekend's closing. As a result, the Rupiah has strengthened by 2.36 percent year-to-date (YTD). However, the Rupiah's appreciation has lagged behind other Asian currencies such as the Thai Baht, Singapore Dollar, and Japanese Yen, but performed better than the Philippine Peso and Hong Kong Dollar, which have depreciated.

Concerns over sluggish tax revenue, which could affect government spending and lead to a slowdown in the domestic economy, have kept the Rupiah above the Rp 13,300 per US dollar level. Furthermore, the monetary authorities' reluctance to allow the Rupiah to appreciate too quickly has also contributed to the somewhat restrained strengthening. Indonesia's achievement of investment-grade status and its still-solid fundamentals, such as controlled inflation and economic growth of around 5 percent, create room for the Rupiah to continue its strengthening.