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Indonesian Rupiah Jumps as Current-Account Shortfall Narrows

February 13, 2014 at 14:16 by Vladimir Vyun

Rupiah notes and coinsNarrowing Indonesia’s current-account deficit and stable monetary policy of the central bank allowed the rupiah to gain today, demonstrating the biggest jump in a month and exceeding the 12,000 per dollar level for the first time this year.

The Bank Indonesia maintained its main interest rate at 7.5 percent and kept other rates unchanged too at today’s meeting. The central bank explained:

The policy is consistent with the tight monetary policy stance currently adopted in order to steer inflation back towards its target corridor of 4.5±1% in 2014 and 4±1% in 2015, as well as to reduce the current account deficit to a more sustainable level.

The bank was optimistic about the domestic economy, saying that “domestic economic growth in Indonesia exceeded Bank Indonesia projections during the fourth quarter of 2013, underpinned by a more balanced structure” and reported:

The current account deficit decreased sharply during the final quarter of 2013, amounting to just 1.98% of GDP and well below the 3.85% of GDP reported in the previous period.

The central bank was also mentioned that “the global economic recovery is gaining momentum amid dogged uncertainty on global financial markets”. All in all, everything looks fine in Indonesia and abroad, making analysts bullish on the rupiah.

USD/IDR was down from 12,085 to 11,975 as of 14:12 GMT today. EUR/IDR declined from 16,427.50 to 16,372.50 after reaching the high of 16,532.50 earlier.

If you have any questions, comments, or opinions regarding the Indonesian Rupiah, feel free to post them using the commentary form below.

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