Have you ever felt anxious seeing the price of household goods getting more expensive every time you step into the supermarket? Imagine the situation that is currently plaguing Indonesia when the value of their currency, the Rupiah, has fallen to the ground to its worst level in history.
Bank Indonesia is no longer just sitting back and watching their currency being squeezed by the global market. They have vowed to carry out ‘currency smart intervention’ to ensure that the Rupiah does not continue to be swept away by the increasingly uncertain economic storm at the moment.
Senior Deputy Governor, Destry Damayanti stressed that the central bank will always be “present” in the market through various financial instruments. This strategy includes cash transactions and derivative instruments to ensure that the pressure on the country’s currency can be eased as soon as possible.
The rise in world oil prices and high demand for the US dollar to pay off foreign debt are the main causes of this wound. Coupled with the needs of the hajj season and the repatriation of dividends, the Rupiah is now at a record level of 17,525 to the dollar.
Impact of War and Crude Oil Prices
The escalating Iranian conflict has pushed energy prices to frightening levels for many Asian countries. Not only Indonesia, but also the Philippines and India have had to “fight” to defend their currencies from continuing to be victims of global geopolitical uncertainties.
Although the Rupiah has fallen by almost 5 percent this year, authorities are optimistic that this seasonal factor will subside. They hope that foreign capital inflows into government bonds can be a panacea for this suffocating economy.
For us here, the fall of regional currencies is an early warning of the cost of imports that will increase. When the Rupiah or neighboring currencies weaken, the price of goods and the stability of regional economies will also be affected in our daily lives.
