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Indonesia's Central Bank Governor Agus Martowardojo holds new Indonesian Rupiah banknotes at an official ceremony in Jakarta, Indonesia December 19, 2016. REUTERS

 
 
JAKARTA: Indonesia's central bank governor said on Monday the bank is seeking to slash three zeroes off the face value of rupiah notes in a move to simplify it currency system.

Bank Indonesia (BI) Governor Agus Martowardojo said he has asked President Joko Widodo to revive a previously shelved plan to redenominate the rupiah to make it "more efficient and simpler".

A draft law backing redenomination was submitted to parliament in 2013 under the previous government. However, the draft was put aside due to instability in Indonesia's financial markets at the time.

If parliament approves a revived bill next year, the central bank would need two more years to prepare new notes. It would then need another seven-years of transition before it could fully remove three zeroes from the currency, he said.
 
 
 
"Prices of goods and services have to also be simplified. Because of the transition period, in which people can use both the old and new rupiah denominations, we are sure it wouldn't affect inflation," Martowardojo said at the launch of a new series of designs for the physical currency.

The largest rupiah denomination is currently 100,000 and the smallest note is 1,000. The central bank's new currency designs will be for notes that use the current denomination system and will feature images of historic Indonesian figures.

Indonesian Finance Minister Sri Mulyani Indrawati said the rupiah's many zeroes reflected the currency's inflation history and that she would discuss the proposal with parliament with a view to introducing it next year. However, she said the proposal is not on the list of current legislative priorities for 2017.

"A redenomination would strengthen assurance in Indonesia's currency, but it does not affect anything nominally," she told reporters at a separate event on Monday. - Reuters
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Just reading articles that indicate that the Rupiah is one of the currencies that will be RVing this year.

You know that bad word that we try and avoid "SOON".

I don't know much about this currency. Does anyone have any idea what kind of profit there is to be made from it?

It's looking very good. Connected to China,Vietnam,Silk Road concept.  This all = :bagofmoney:

 

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https://www.indonesia-investments.com/finance/financial-columns/redenomination-of-indonesian-rupiah-draft-bill-prepared-by-bi/item8022?.......Redenomination of Indonesian Rupiah Draft Bill Prepared......

Bank Indonesia has prepared a draft bill on the redenomination of the Indonesian Rupiah (Draft Bill). The Draft Bill is aiming to improve the economic efficiency and to create smoother commercial transactions. The Draft Bill suggests to remove the final 3 digits of the current Rupiah. By removing the final three digits, the use of the Rupiah would be simplified, however the value of the Rupiah would remain the same.

Implementation of the New Indonesian Rupiah

During the redenomination process, where the last three digits from the current Rupiah are removed, both the new and current Rupiah can be used by the public. The classification of the current Rupiah and the new Rupiah is set out in the table below:

PREEXISTING RUPIAH
100,000
New Rupiah 100
50,000
New Rupiah 50
20,000
New Rupiah 20
10,000
New Rupiah 10
5,000
New Rupiah 5
2,000
New Rupiah 2
1,000
New Rupiah 1
500
New Rupiah 0.5 (¢50)
200
New Rupiah 0.2 (¢20)
100
New Rupiah 0.1 (¢10)
50
New Rupiah 0.05 (¢5)

Source: Bisnis Indonesia

Bank Indonesia aims in the draft to complete the redenomination process on January 1, 2020. After that date, all documents and signage (quotations, values of goods, regulations, agreements, financial documents, etc.) must use the value of the new Rupiah.

Rupiah-Note-Rp-100-000-IDR-Indonesia-Inv

Circulation Procedures of the New Indonesian Rupiah

The circulation of the new Rupiah will consist of two phases:

  1. The First Phase (January 1, 2020 – December 31, 2024):
    1. Bank Indonesia will issue and circulate the physical currency with the sign “new” incorporated onto the body of the money (First New Money).
    2. The Old Rupiah can still be used as payment method, until its revocation on December 31, 2024
    3. The Old Rupiah can still be exchanged at Bank Indonesia until December 31, 2034
  2. The Second Phase (January 1, 2025 – December 31, 2028)
    1. Bank Indonesia will issue and circulate the physical currency, without the sign “new” incorporated onto be body of the currency
    2. The First New Money will be valid until its revocation on December 31, 2028
    3. The First New Money can be exchanged at Bank Indonesia until December 31, 2038

Mandatory Implementation Measures

The Draft Bill requires both businesses and Individuals to adhere to the following obligations:

  1. Prices of goods and services must mention both the pre-existing and new Rupiah price during the period from June 1, 2019 until January 1, 2023. This obligation does not apply to micro level businesses)
  2. The value of goods and services must remain the same when converting prices from the old Rupiah price to the new Rupiah price. Value rounding of the new prices is however allowed
  3. The value of the Rupiah in documents must be adjusted to the new Rupiah value.

Failure to comply with the above obligations may lead to fines up to IDR 200 million (old value) and/or an imprisonment up to three months.

This column is provided by PNB Law Firm Jakarta

Pnb-law-firm-Jakarta-Indonesia-investmen

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Hi i'm from Indonesia....i dont know much about redenomination...but if u expecting rupiah to rv/ri i think it will be very hard to happen, close to impossible. If the redenomination happen it will at least 4-5 years from now and its kind of draw situation in my view. Just for consideration

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8 hours ago, soccercrazy said:

Hi i'm from Indonesia....i dont know much about redenomination...but if u expecting rupiah to rv/ri i think it will be very hard to happen, close to impossible. If the redenomination happen it will at least 4-5 years from now and its kind of draw situation in my view. Just for consideration

 

Gracias :cheesehead:

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http://www.livetradingnews.com/redenomination-indonesian-rupiah-progress-50766.html.......

Redenomination Of The Indonesian Rupiah In Progress

By Ivy Heffernan on August 7, 2017No Comment

 
 
Redenomination Of The Indonesian Rupiah In Progress

Bank Indonesia has prepared a draft bill on the redenomination of the Indonesian Rupiah (Draft Bill). The Draft Bill is aiming to improve the economic efficiency and to create smoother commercial transactions. The Draft Bill suggests to remove the final 3 digits of the current Rupiah. By removing the final three digits, the use of the Rupiah would be simplified, however the value of the Rupiah would remain the same.

Screenshot_39.png

Circulation Procedures of the New Indonesian Rupiah

The circulation of the new Rupiah will consist of two phases:

  1. The First Phase (January 1, 2020 – December 31, 2024):
    1. Bank Indonesia will issue and circulate the physical currency with the sign “new” incorporated onto the body of the money (First New Money).
    2. The Old Rupiah can still be used as payment method, until its revocation on December 31, 2024
    3. The Old Rupiah can still be exchanged at Bank Indonesia until December 31, 2034
  2. The Second Phase (January 1, 2025 – December 31, 2028)
    1. Bank Indonesia will issue and circulate the physical currency, without the sign “new” incorporated onto be body of the currency
    2. The First New Money will be valid until its revocation on December 31, 2028
    3. The First New Money can be exchanged at Bank Indonesia until December 31, 2038

Mandatory Implementation Measures

The Draft Bill requires both businesses and Individuals to adhere to the following obligations:

  1. Prices of goods and services must mention both the pre-existing and new Rupiah price during the period from June 1, 2019 until January 1, 2023. This obligation does not apply to micro level businesses)
  2. The value of goods and services must remain the same when converting prices from the old Rupiah price to the new Rupiah price. Value rounding of the new prices is however allowed
  3. The value of the Rupiah in documents must be adjusted to the new Rupiah value.

Failure to comply with the above obligations may lead to fines up to IDR 200 million (old value) and/or an imprisonment up to three months.

Technical Analysis

Screenshot_38.png

Overall, the bias in prices is: Sideways.

Short term: Prices are stalling.

Intermediate term: Prices are ranging.

The projected upper bound is: 13,358.09.

The projected lower bound is: 13,281.91.

The projected closing price is: 13,320.00.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 8 white candles and 2 black candles for a net of 6 white candles. During the past 50 bars, there have been 26 white candles and 16 black candles for a net of 10 white candles.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 43.4783. This is not an overbought or oversold reading. The last signal was a buy 13 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 46.77. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 18 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -22. This is not a topping or bottoming area. The last signal was a buy 12 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 16 period(s) ago.

Rex Takasugi – TD Profile

FOREX IDR= closed up 5.000 at 13,320.000. Volume was 27% below average (neutral) and Bollinger Bands were 14% narrower than normal.

Open             High             Low               Close             Volume
13,318.000  13,321.000   13,315.000  13,320.000   76

Technical Outlook
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish

Moving Averages: 10-period    50-period    200-period
Close:                       13,323.30   13,324.06    13,335.97
Volatility:                1                    2                    4
Volume:                   114               98                  105

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

FOREX IDR= is currently 0.1% below its 200-period moving average and is in an downward trend. Volatility is extremely low when compared to the average volatility over the last 10 periods. There is a good possibility that there will be an increase in volatility along with sharp price fluctuations in the near future. Our volume indicators reflect volume flowing into and out of IDR= at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on IDR= and have had this outlook for the last 11 periods.

 
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http://www.livetradingnews.com/ndonesian-rupiah-idr-time-low-49707.html.....

Indonesian Rupiah (IDR) All Time Low

By Ivy Heffernan on July 28, 2017No Comment

 
 
Indonesian Rupiah (IDR) All Time Low

Indonesia’s rupiah dropped to a 17-year low against the dollar on Thursday, pressured by slowing economic growth and high inflation in Southeast Asia’s largest economy.

The rupiah fell 0.4 percent to 13,271 against the dollar, the weakest level since August 1998 when Indonesia was in the depths of a financial crisis that led to the ouster of autocratic leader Suharto.

Over the past few months, the central bank has taken several steps aimed at deepening the Indonesian currency market and stabilising the rupiah, including relaxing rules on foreign exchange transactions and setting hedging rules for Indonesian companies. A ban of dollar usage for all local transactions will take effect on July 1. But the measures have done little to halt the slide in a currency weighed down by Indonesia’s weakest economic growth since 2009 and the highest inflation since December.

Technical Analysis

Screenshot_77-1.png

Overall, the bias in prices is: Sideways.

Short term: Prices are stalling.

Intermediate term: Prices are ranging.

The projected upper bound is: 13,367.75.

The projected lower bound is: 13,284.09.

The projected closing price is: 13,325.92.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 7 white candles and 3 black candles for a net of 4 white candles. During the past 50 bars, there have been 26 white candles and 15 black candles for a net of 11 white candles.

Three white candles occurred in the last three days. Although these candles were not big enough to create three white soldiers, the steady upward pattern is bullish.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 61.1111. This is not an overbought or oversold reading. The last signal was a buy 7 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 48.40. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 12 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -24. This is not a topping or bottoming area. The last signal was a buy 6 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 10 period(s) ago.

Rex Takasugi – TD Profile

FOREX IDR= closed up 9.000 at 13,326.000. Volume was 15% above average (neutral) and Bollinger Bands were 34% wider than normal.

Open             High              Low               Close             Volume
13,315.000   13,330.000  13,315.000  13,326.000   120

Technical Outlook
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish

Moving Averages: 10-period    50-period   200-period
Close:                       13,320.50   13,322.02    13,327.05
Volatility:                2                    2                   4
Volume:                   121                99                105

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

FOREX IDR= is currently 0.0% below its 200-period moving average and is in an downward trend. Volatility is Our volume indicators reflect volume flowing into and out of IDR= at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on IDR= and have had this outlook for the last 5 periods.

 
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The First Phase (January 1, 2020 – December 31, 2024):

  1. Bank Indonesia will issue and circulate the physical currency with the sign “new” incorporated onto the body of the money (First New Money)..............
  2. Prices of goods and services must mention both the pre-existing and new Rupiah price during the period from June 1, 2019 until January 1, 2023. This obligation does not apply to micro level businesses)
  3. The value of goods and services must remain the same when converting prices from the old Rupiah price to the new Rupiah price. Value rounding of the new prices is however allowed
  4. The value of the Rupiah in documents must be adjusted to the new Rupiah value...... Correct me if I am wrong . It says the first phase for new currency is January 2020 . Prices of goods must mention pre existing and new price in June 1 ,2019 (before new rupiah release ) . The value of Rupiah in documents must be adjusted to the new Rupiah value (before the release of new Rupiah ). Why the 6 month wait for new currency if the price is changing in June ?
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10 hours ago, blueskyline said:

The First Phase (January 1, 2020 – December 31, 2024):

  1. Bank Indonesia will issue and circulate the physical currency with the sign “new” incorporated onto the body of the money (First New Money)..............
  2. Prices of goods and services must mention both the pre-existing and new Rupiah price during the period from June 1, 2019 until January 1, 2023. This obligation does not apply to micro level businesses)
  3. The value of goods and services must remain the same when converting prices from the old Rupiah price to the new Rupiah price. Value rounding of the new prices is however allowed
  4. The value of the Rupiah in documents must be adjusted to the new Rupiah value...... Correct me if I am wrong . It says the first phase for new currency is January 2020 . Prices of goods must mention pre existing and new price in June 1 ,2019 (before new rupiah release ) . The value of Rupiah in documents must be adjusted to the new Rupiah value (before the release of new Rupiah ). Why the 6 month wait for new currency if the price is changing in June ?

Both you and me both nonthey will not telegraph what they are going to do....if you read the recent imf reportindonesia are ready to rock and roll...easy bet surely worth it I would think..

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Yes it has happened already .........Indonesia bans foreign currencies in domestic transactions

  • DOW JONES
  • Dow Jones
  • 10:36AM July 1, 2015

Australians holidaying in Indonesia could find themselves short of money from today after the country’s central bank pushed through new legislation prohibiting foreign currencies from being used in domestic transactions.

The new rule, which takes effect today, has been introduced as Jakarta tries to get a grip on the falling rupiah, a historically volatile currency that has been on a downward slide over the last four years..

Trust in the rupiah has been fragile ever since the Asian financial crisis in the late 1990s, when its value went into free fall and Indonesia went under an International Monetary Fund rehabilitation program. The rupiah has become one of Asia’s worst-performing currencies this year, depreciating around 7% against the dollar. Bank Indonesia says the prohibition against foreign currency in domestic transactions is intended to reduce reliance on the dollar and other foreign currencies and mitigate against capital outflows.

According to Bank Indonesia, transactions within the country in currencies other than rupiah amount to $73 billion a year. From today, prices for all goods and services will need to be quoted in rupiah only, a measure that will affect prices for hotels, and restaurants used by tourists as well as local services, such as legal advice, insurance and accounting.

As is often the case with Indonesian regulations, the law empowering the ban was passed several years ago but implementation has only been announced over the past three months.

The shift comes at a time when President Joko Widodo’s government is struggling to draw investment to help fund infrastructure projects that are badly needed in this Southeast Asian nation of 250 million people. Economic growth has hit a six-year low and confidence in the current government’s ability to manage economic policy has slumped. “You can only implement this policy when the exit rate risk is relatively small,” said Muhamad Chatib Basri, a former finance minister and chairman of the Mandiri Institute, a research think tank affiliated with state-owned Bank Mandiri. Peter Jacobs, a spokesman for the central bank, said Bank Indonesia would consider allowing companies more time to put the rule into effect on a project-by-project basis. “If there are corporations that have concerns about transactions about any problems related to this, they can write us a letter and we’ll see the possibility to give them a delay,” he said

affected businesses say they are trying to minimise the impact of the regulation by building in market-based adjustments to help offset the rupiah’s volatility. Some property companies are considering a dollar-linked rupiah rate that changes with each billing cycle.

Other companies are expected to increase their prices in rupiah to account for the risk of depreciation.

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37 minutes ago, blueskyline said:

Yes it has happened already .........Indonesia bans foreign currencies in domestic transactions

  • DOW JONES
  • Dow Jones
  • 10:36AM July 1, 2015

Australians holidaying in Indonesia could find themselves short of money from today after the country’s central bank pushed through new legislation prohibiting foreign currencies from being used in domestic transactions.

The new rule, which takes effect today, has been introduced as Jakarta tries to get a grip on the falling rupiah, a historically volatile currency that has been on a downward slide over the last four years..

Trust in the rupiah has been fragile ever since the Asian financial crisis in the late 1990s, when its value went into free fall and Indonesia went under an International Monetary Fund rehabilitation program. The rupiah has become one of Asia’s worst-performing currencies this year, depreciating around 7% against the dollar. Bank Indonesia says the prohibition against foreign currency in domestic transactions is intended to reduce reliance on the dollar and other foreign currencies and mitigate against capital outflows.

According to Bank Indonesia, transactions within the country in currencies other than rupiah amount to $73 billion a year. From today, prices for all goods and services will need to be quoted in rupiah only, a measure that will affect prices for hotels, and restaurants used by tourists as well as local services, such as legal advice, insurance and accounting.

As is often the case with Indonesian regulations, the law empowering the ban was passed several years ago but implementation has only been announced over the past three months.

The shift comes at a time when President Joko Widodo’s government is struggling to draw investment to help fund infrastructure projects that are badly needed in this Southeast Asian nation of 250 million people. Economic growth has hit a six-year low and confidence in the current government’s ability to manage economic policy has slumped. “You can only implement this policy when the exit rate risk is relatively small,” said Muhamad Chatib Basri, a former finance minister and chairman of the Mandiri Institute, a research think tank affiliated with state-owned Bank Mandiri. Peter Jacobs, a spokesman for the central bank, said Bank Indonesia would consider allowing companies more time to put the rule into effect on a project-by-project basis. “If there are corporations that have concerns about transactions about any problems related to this, they can write us a letter and we’ll see the possibility to give them a delay,” he said

affected businesses say they are trying to minimise the impact of the regulation by building in market-based adjustments to help offset the rupiah’s volatility. Some property companies are considering a dollar-linked rupiah rate that changes with each billing cycle.

Other companies are expected to increase their prices in rupiah to account for the risk of depreciation.

Did you buy some? I have some on the way..

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  • 8 months later...

en.antaranews.com/news/115653/government-backs-bi-to-intervene-in-rupiahs-exchange-rate.........

antaranews.com5.png
 

Government backs BI to intervene in rupiah`s exchange rate

Reporter: antara  18 hours ago

Government backs BI to intervene in rupiah`s exchange rate

Illustration. Rupiah currency. (ANTARA /Sigid Kurniawan)

Jakarta (ANTARA News) - The government supports Bank Indonesia (BI`s) effort to intervene in the rupiah`s exchange rate that continued to fall in the past two weeks, Vice President Jusuf Kalla said.

"As we know, the monetary issue is the responsibility of BI. BI can intervene in the rupiah to prevent it from weakening suddenly. Should it weaken, the weakening should be slow. It is the duty of BI (to intervene), and the government agrees to it," he stated at the Vice Presidential Office here on Tuesday.

For the first time since December 2015, the rupiah broke the psychological level of Rp14 thousand per dollar on Monday. It traded at Rp14,003 per dollar in the spot market.

The rupiah fell again by 35 points to trade at Rp14,028 per dollar in the interbank spot market on Tuesday morning.

The Jakarta Interbank Spot Dollar Rate announced by BI on Tuesday showed that the rupiah weakened to Rp14,036 per dollar.

"The imminent hike in the inflation rate in the US remains one of the factors causing the dollar to strengthen, because the inflation hike will prompt the Fed to increase its interest rate," money market analyst Reza Priyabada of Binaartha Sekuritas remarked in Jakarta on Tuesday.

One of the factors pushing the US inflation rate to increase is the creation of more jobs. The number of jobs in the US has increased to 164 thousand. Although the figure fell short of the market estimate, it still recorded growth, he added.

BI believes that the rupiah can still likely strengthen soon owing to manageable domestic economic fundamentals and pressure in the past two days largely due to the dynamics of the US economy.

"The rupiah still has a likelihood of strengthening due to the manageable domestic condition," BI Deputy Governor Dody Budi Waluyo stated on Tuesday.

The manageable domestic economic fundamentals include the inflation rate, which is close to the central bank`s lower target range of 2.5-4.5 percent; manageable state budget deficit, and movement of the current account deficit within the healthy range of less than three percent of the national gross domestic product (GDP), he explained.

He pointed out that the first-quarter economic growth of 5.06 percent was also in line with BI`s economic growth target of 5.1-5.5 percent for this year. However, while referring to BI`s earlier statement, the growth fell short of the expectation of the central bank that had projected the first-quarter growth at 5.1 percent year-on-year.

"BI`s assessment of the GDP remains positive, and (the economy) is projected to grow by 5.1-5.5 percent at the end of 2018," he noted.

Reported by Fransiska Ninditya
EDITED BY INE
(T.S012/A/KR-BSR/B003)

Editor: Heru Purwanto

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  • 3 weeks later...

http://www.en.netralnews.com/news/business/read/21504/rupiah.moves.stronger.to.idr13.955.on.thursday.morning..............

Rupiah Moves Stronger to IDR13,955 on Thursday Morning

Thursday, 31 May 2018 | 10:40 WIB
    
76-ilustrasi-696x341.jpg

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JAKARTA, NNC -- The rupiah exchange rate in Jakarta on Thursday morning moved higher by 38 points to IDR13,955 compared to the previous position of IDR13,993 per US dollar.

Binaartha Sekuritas’ analyst, Reza Priyambada in Jakarta on Thursday (5/312018), said that the Bank Indonesia Board of Governors Meeting was incidental under the new BI Governor Perry Warjiyo, which again decided to raise its benchmark interest rate by 25 basis points to become 4.75 percent seems to have been 'price in' where market participants have predicted earlier.

"As a result, the rupiah has not experienced much movement, and expection for a rise also did not happen as the price of the sentiment was already in line," Reza said, quoted by Antara.

According to Reza, the movement of rupiah responds more negatively to global conditions where the euro currency rate has decreased compared to US dollar after market players worried about the political conditions in Italy.

He said, the fluctuation of rupiah which tends to decrease is expected to open the opportunity for the rupiah to strengthen again.

On the other hand, the US dollar movement in the global forex market tends to turn weaker after the euro strengthens.

The strengthening of the euro comes after the potential for a referendum and coalition of parties to overcome political turmoil in the Italian government.

The rupiah is estimated to move with the support range IDR13,970 per US dollar and resistance IDR13,988 per US dollar.

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The process they are describing and outlining with India’s currency is a Lop. A redenomination, not a revalue. I would not buy any of it personally. They are simply introducing a new currency with 3 less zeros that are equal to their old currency with 3 extra zeros.. 

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  • 9 months later...

https://think.ing.com/articles/indonesia-country-brief-reforms-needed-for-lift-off/......

Indonesia country brief: Reforms needed for lift-off

Author
 

Indonesia has seen growth plateau at the 5% range since 2016.  After targeting 7% since taking office in 2014, President Jokowi looks to secure a fresh term with the current administration forecasting the fastest pace of growth in the next two years. 

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Recent Growth and outlook: On cruise control with elections ahead

Growth in Indonesia has hovered about the 5% level in recent quarters and given the nation’s solid fundamentals will likely keep to this range in the near term.  The administration however is now forecasting economic growth to average 5.3% in 2019 and at 5.3-5.5% in 2020 against a backdrop of benign inflation.  The elections in April are expected to boost economic growth on the consumption side but more investment and reforms will be needed to achieve lift-off and break free from the 5% level.     

Inevitably the growth trajectory will depend largely on the elections, with incumbent Joko Widodo (Jokowi) vowing to continue his infrastructure and investment push while challenger Prabowo Subianto (Prabowo) has pledged to ban imports of agricultural products, lower the reliance on imported oil and reinstate fuel subsidies cut by Jokowi.        

Indonesia GDP growth (2010 base year) actual and forecast values

 

2010 base year

Inflation and outlook: well-behaved and on course to stay within target

Price pressures have been subdued with the basic food component pushing headline inflation closer to the lower-end of the 2.5-4.5% inflation target.  Meanwhile, prepared food, beverages, tobacco and utilities were the main contributors to the latest 2.57% inflation reading for February.  Meanwhile, core inflation, which strips out some food items as well as government influenced transport and utilities was also well-behaved, settling at 3.06% for the month of February.    

One factor that has helped inflation settle at the lower-end of the 2.5-4.5% target has been the ability of Indonesia to import important grains which has ensured adequate supply domestically, something that Prabowo has vowed to cancel should he take power. 

On the other hand, Prabowo has also campaigned on a promise to reinstate fuel subsidies and lowering reliance on imported fuel via higher biofuel content, something that would also affect the inflation dynamic should he wrest the presidency from Jokowi.  For the time being, inflation is forecast to remain within the lower end of the inflation target with Bank Indonesia (BI) shifting focus to financial market stability over price stability.   

Indonesia inflation (in %) actual and forecast values

 

Bloomberg and ING

Monetary policy and interest rates: BI on hold for now but rate cut now on table

In 2018, Bank Indonesia (BI) unleashed a flurry of rate hikes at the height of the emerging market currency rout, citing the need to establish financial market stability as they looked to steady the Indonesian Rupiah’s fall. Governor Warjiyo hiked a total of 6 times in 2018, beginning in May, to bring BI’s 7-day reverse repurchase rate to 6.0% by November with the last rate hike catching some market players by surprise. BI had maintained that raising rates aggressively and acting in a “pre-emptive” manner was done in order to maintain the stability of the economy and financial system by keeping financial assets attractive to foreign funds. The ability to keep the IDR stable is in line with the overall government move to keep the current account from ballooning. 

The widening of the trade and current account deficits had been flagged as a major concern for foreign investors and one of the main reasons cited for the flight of capital at the height of the EM rout in 2018. In the coming months, the central bank will remain vigilant to ensure IDR stability, although the Fed’s recent reversal in outlook coupled with Governor Warjiyo’s comments indicating that he felt rates may be “close to peak” hint at the possibility for a policy reversal in the coming months.  Should the IDR remain stable, with an appreciation bias and global market conditions remaining favourable to emerging markets, we believe Warjiyo will be afforded a window to dial back 2018’s rate hike salvo to help boost economic growth in an environment of slowing global growth.        

Country specific highlight: Narrowing the current account

The twin threats of 2018 - a trade war between the United States and China moving in tandem with a hawkish Federal Reserve - buffeted currencies across emerging markets.  The three currencies that had been hit the most were those whose economies ran substantial current account deficits, with the IDR joining the INR and PHP at the back of the line. For the year, Indonesia recorded a current account deficit of 2.98% of GDP, the widest since 2014 as the deficit swelled to $31.1bn. With the trade gap ballooning to $8.496bn, Indonesia rolled out several reforms to help boost exports, with incentives and tax perks doled out to exporters while some infrastructure projects requiring substantial imports were postponed in order to achieve import compression. 

Indonesia is now targeting a current account deficit of 2.5% of GDP which should alleviate some pressure on the IDR, especially with the turn in risk sentiment in the first quarter of the year. In 2019, market players will continue to monitor whether Indonesia can continue to whittle down the current account deficit, with early 2019 trade data showing a surplus recorded, but at the expense of a large contraction in imports.

Indonesia trade balance and current account % to GDP

 

Bloomberg

Currency movement: IDR depreciates then steadies as foreign flows return

The IDR was one of the worst performing currencies in 2018 with stark risk-on sentiment forcing foreign investors to head for the exits, noting the outlook for the Fed and the US-China trade war.  At the height of the emerging market currency rout, the Rupiah had lost 12.72% from its level at the start of the year on renewed concerns about Indonesia’s current account position.  Bank Indonesia was called into action, actively participating in the foreign exchange market, setting up a domestic non-deliverable forward market and revising rules on export revenue repatriation to limit outflows. 2019 brings a more favourable environment with the Fed taking a more dovish tack while US and China appear amenable to some form of agreement, hopefully in the near term. The IDR has managed to appreciate for the most part in 2019 as portfolio flows have returned as a result of the improved sentiment.  With the currency stable and growth expected to receive a boost from the elections, Bank Indonesia has held off on adjusting monetary policy while vowing to help boost liquidity to offset the ill effects of its recent aggressive tightening cycle.  If risk sentiment continues to favour emerging markets, we could see the IDR appreciating further as Governor Warjiyo still views the currency as “undervalued” with the possibility of a policy reversal from the central bank now gaining some steam.   

Indonesia foreign portfolio equity flows

 

Bloomberg

Summary: on cruise control but reforms needed for lift-off

Growth prospects for Indonesia remain favourable, given still robust domestic consumption which will be aided further by benign inflation dynamics.  Elevated borrowing costs, raised last year to ensure IDR stability, however may limit capital formation to some extent but government spending is expected to continue to provide a lift. Reforms and investment may be needed in order for the economy to break out of the 5% trend, something that incumbent Jokowi has pledged to do with improvements in infrastructure seen as a priority.  Meanwhile, Indonesia will need to secure other more stable sources of foreign currency, given the economy’s susceptibility to foreign outflows and its reliance on low value added exports for foreign currency.  A shift to higher value added export products would help address two concerns at once by securing a stable source of foreign flows and at the same time offering an alternative outlet for the young labour force in the manufacturing sector.  Regardless of the outcome of the election, Indonesia’s growth trajectory will lean heavily on the next president’s ability to boost investment in order to improve productivity and increase efficiencies.  Growth of 5% is highly achievable but reforms to push a shift to higher value added production will be key to not only secure Indonesia’s external position but also provide another stable source of growth via higher value added manufacturing.   

 
 
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https://www.thejakartapost.com/news/2019/03/27/bank-indonesia-navy-distribute-cash-to-outermost-islands.html.......

Bank Indonesia, Navy distribute cash to outermost islands

  • Fadli

    The Jakarta Post

Batam   /   Wed, March 27, 2019   /   06:38 pm
Bank Indonesia, Navy distribute cash to outermost islandsMembers of Bank Indonesia's mobile cash expedition team pose for a photo in front of KRI Lepu 861 before departing to six outermost, frontier and least developed (3T) islands in Riau and North Sumatra provinces at Batu Ampar Seaport, Batam, Riau Islands, on Wednesday, March 27. (JP/F

Bank Indonesia (BI) in cooperation with the Indonesian Navy is distributing cash to the country’s 116 outermost islands to help prevent the use of foreign currencies in border areas.

“Don’t let them use foreign currencies because the rupiah is unavailable there,” BI’s currency management department director Luctor E. Tapiheru said on the sidelines of the launch of BI’s mobile cash expedition to six outermost, frontier and least developed ( 3T ) islands at Batu Ampar Seaport, Batam, Riau Islands, on Wednesday.

The cash is being distributed to the islands of Rupat, Rangsang, Bengkalis and Panipahan in Riau; and Tebing Tinggi and Belawan in North Sumatra.

The program will run until Tuesday next week, with the cash transported on the Indonesian Navy’s KRI Lepu 861 vessel with 15 central bank employees onboard.

“BI is tasked with replacing outdated banknotes on the islands with the new ones and decreasing the circulation of foreign currencies,” Luctor said.

BI has scheduled 15 distribution trips this year to 116 3T islands across Indonesia to dispense between Rp 4.5 billion (US$ 316,611) and Rp 5 billion to several islands each trip. However, cooperation with other parties was needed to reach the district and subdistrict levels, Luctor said.

There are currently 43 BI representative offices across the archipelago, mostly located in the provincial capitals.

“The Navy's vessels are capable of reaching remote areas,” he said.

The BI and the Navy had been cooperating for the last eight years, the Navy chief of staff deputy operation assistant Cdre. Yusuf said.

“This is part of maintaining Indonesia’s sovereignty. Sipadan and Ligitan were lost because the currency used on the islands was Malaysian,” said Yusuf, adding that the Navy had prepared 15 vessels for the task.

 

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The dinar is the main currency to invest in, but if you have extra funds, it's always good to diversify such as in the rupiah. Just my opinion. As always, don't risk money you can't afford to lose! Good luck to all! :twothumbs:

 

 

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