Jakarta – Bank Indonesia (BI) has acknowledged that the rupiah exchange rate against the US dollar was still affected by external factors, particularly negotiations between the United States and China as the two nations continue a trade war that started last year.
"The major factor that affects Indonesia and its financial market is the external dynamic market," BI senior deputy governor Mirza Adityaswara said in Jakarta on Monday as quoted by kontan.co.id.
He said the market was still paying attention to US-China negotiations. The problem was that US President Donald Trump gave negative signals through his Twitter account by saying that he might further increase import taxes for more products from China.
This has caused a decline in the global financial market and weakened currencies in emerging countries with current account deficits.
Mirza said the domestic factors affecting the rupiah were still controllable, although the inflation rate tended to increase during Ramadan and the Idul Fitri Holiday.
On Tuesday, the rupiah stood at Rp 14,380 per US dollar, according to the Jakarta interbank spot dollar rate (JISDOR), down from Rp 14,360 per US dollar on Monday. However, this was still better than Friday's position of Rp 14,451 per US dollar.
Samuel Aset Manajemen economist Lana Soelistianingsih said in Jakarta that the trade war had further pushed down China's manufacturing sector, marked by the decline in profit of China's corporations.
"The decline had occurred since November 2018 and the benefit of [China's manufacturing sector] will likely further decline," Lana said as quoted by Antara news agency. (bbn)