How Long Global Economic Turmoil Can Impact Indonesia

JAKARTA, KOMPAS.com - The Rupiah again weakened against the US dollar at the opening of Monday’s money market as global market pressure was prompting market players to seek "safe haven" currencies.

The Rupiah’s exchange rate against the US dollar in the Jakarta interbank market on Monday morning was down by seven points to Rp8.547 per US dollar compared to the previous day’s Rp8.540.

Bank Saudara’s financial market observer Rully Nova said here Monday, the lack of positive sentiment for the global economy made traders shift their funds to currencies where the value of their assets could be maintained.

"Global conditions are still shrouded in negative sentiment prompting investors to place their funds in ’save haven’ places such as the US dollar," he said.

However, developing countries like Indonesia were expected to withstand the global economic turmoil along with the country’s growth which was expected to increase.

"The global economic turmoil is only short-term for Indonesia, Indonesia’s economy is still strong enough to withstand the negative global sentiment," he said.

Samuel Securities’ foreign exchange observer Lana Soelistianingsih said that Asian markets tend to be "mixed" although the negative sentiment was still there. The Rupiah however was technically and potentially expected to strengthen as Indonesia was believed to achieve an investment grade.

"Expectations that Indonesia will reach an investment grade will cause the domestic currency to strengthen in the future," she said.

Lana said the government was planning to issue global bonds in early 2012, when global liquidity was high enough to obtain the best price.

"It is believed that liquidity in the domestic market will also still be associated with expectations that Indonesia will achieve an investment grade," Lana said. Foreign funding was currently less expensive than domestic financing, she said.