The Rupiah Performs Better Than Other Emerging Market Currencies

The United States Federal Reserve's (The Fed) interest rate hike and concerns over the impact of the US-China trade war triggered a weakening of emerging market currencies, including the Indonesian Rupiah. Further fueling anxieties was the fear that the crises in Argentina and Turkey would spread to other developing nations.

As shown in the graph below, currencies in emerging market economies experienced a weakening against the US dollar. However, the Rupiah's performance remained better than other currencies. The Argentine Peso depreciated by more than 52% against the US dollar this year (December 29, 2017 – September 5, 2018), and the Turkish Lira weakened by more than 43%. Meanwhile, the Rupiah weakened by only 9.17% against the US dollar during the same period.

On Wednesday (September 5th), the Rupiah exchange rate closed at Rp 14,938 per US dollar, a slight weakening of 0.02% compared to the previous day's closing. Global uncertainty, coupled with a trade and current account deficit, pressured the Rupiah. However, fundamentally, the Rupiah remains quite solid, with economic growth above 5%, inflation maintained at 3%, an attractive interest rate of 5.5%, and foreign exchange reserves of US$118 billion, sufficient to finance more than 6 months of imports and government foreign debt.