4-5-2024 (JAKARTA) Indonesia’s central bank is brimming with confidence that the embattled rupiah will continue its comeback against the mighty U.S. dollar, as the archipelago’s recent surprise rate hike succeeds in luring foreign capital back to its shores.
Addressing journalists on Friday, Bank Indonesia (BI) Governor Perry Warjiyo struck an upbeat tone, predicting the rupiah’s rebound would extend through to the end of 2024, bolstered by a resurgence of investor inflows.
“The rupiah’s appreciation will continue from now on until the end of the year if we look at market data,” Warjiyo declared at a joint press conference with other Indonesian financial regulators. He pointed to exchange rates for non-deliverable forward transactions as a bullish indicator.
The Governor reiterated BI’s forecast that the rupiah is on course to trade at around 16,000 to the dollar in the near term, before potentially strengthening further to 15,800 as the year progresses.
While the rupiah closed Friday’s session at 16,080 per dollar – a 0.62% firming against its prior close – it has still shed around 4% of its value this year, battered by the relentless surge of the greenback amid dwindling expectations of Federal Reserve rate cuts in 2024.
Last month, however, BI delivered a surprise rate hike aimed at shoring up the ailing rupiah after it plumbed four-year lows amidst risk-averse global markets.
And evidence is mounting that the unorthodox monetary tightening is paying dividends, luring investors back to Indonesia’s high-yielding assets.
In a bid to compound this momentum, BI will next week double the frequency of its rupiah securities auctions to twice weekly, up from the current once-a-week schedule. The move is designed to entice even greater capital inflows into Southeast Asia’s largest economy.
Warjiyo was unequivocal that Indonesia’s robust economic prospects would further buttress market confidence in the rupiah’s revival.
Despite the global headwinds of soaring inflation and monetary policy tightening, the Governor predicted GDP growth for 2023 would maintain its impressive pace above 5%, accompanied by benign price pressures.
Last year, the Indonesian juggernaut expanded by 5.05%. Traders will scour official first-quarter GDP figures due on Monday for the latest salvo in the rupiah renaissance.
