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JAKARTA. Bank Indonesia (BI) expects the US dollar to weaken following the decision of the American central bank, the Federal Reserve, to inject a monetary stimulus to spur growth and push down unemployment rates in the world's largest economy.
"Overall, the liquidity of the dollar in the global market will increase. Such pressure will weaken the dollar, albeit slightly," BI Governor Darmin Nasution told reporters on Friday.
A two-day meeting of the Fed's board of governors concluded on Thursday (Friday, Jakarta time) that the US would implement another round of so-called quantitative easing, a monetary stimulus in which the US central bank will inject more money into the market by buying mortgage-backed securities, for a third time after it implemented the same policy in 2008 and 2010.
However, the impact of the stimulus on currencies throughout the world depends on the internal strengths of each economy, according to Darmin.
"Although the dollar will weaken, [the impact on other currencies] will depend on the situations in their own economies," the central bank governor noted, adding that "Our economy has strong fundamentals as we have seen robust growth, low inflation and have a low fiscal deficit."
The rupiah on Friday hovered at around 9,573 per dollar, according to the BI mid rate. The currency has dropped more than 5 percent this year, the worst performer among Asia’s 11 most active currencies.
Gadjah Mada University economist A. Tony Prasetiantono told The Jakarta Post recently that the US quantitative-easing policy would be beneficial for Indonesia as it would strengthen the rupiah without BI having to dig deep into its foreign exchange reserves.
The nation’s foreign exchange reserves rose slightly to $109 billion by the end of August, but were still lower than the record high of $124.6 billion in August last year, as the central bank has repeatedly intervened to defend the rupiah by injecting more greenbacks into the Indonesian market. (The Jakarta Post)
