Bank Indonesia Expects Stronger Rupiah as Fed Taper Priced In

(Bloomberg) -- Bank Indonesia expects a stronger rupiah as investors have priced in the U.S. Federal Reserve’s plan to taper asset purchases.

“The rupiah is estimated to remain in a strengthening trend in line with strong economic fundamentals and positive investor perception that support inflows to domestic financial assets,” Hariyadi Ramelan, Bank Indonesia’s executive director for monetary management, told Bloomberg on Friday.

The central bank expects the currency’s recent decline to be temporary, as the market has priced in Fed’s comments, Ramelan added.

The rupiah is set for its largest weekly drop since July 2020, losing 1.5% to trade at 14,378 as of 12:06 a.m in Jakarta on Friday. Foreign investors have pulled almost $2 billion from local bonds so far this quarter.

“Bank Indonesia isn’t guarding the rupiah’s exchange-rate level but its stability,” Ramelan said. The central bank remains in the market and stands ready with its triple intervention measures if there’s excessive volatility, he added.

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