Rupiah, the Indonesian currency is the second worst performing currency in the world for the past three months, following Zimbabwe. The recent breach of Rp 10,000 psychological level will have lasting impact on the business confidence, despite many government officials saying otherwise. The govt can only do what the govt will always do: reassure the market and prevent panic selling as well as speculation amongst the currency players.
The last time Rupiah fell this low was in 2001. People thought that the economy is improving yet the underperformance of Rupiah highlights many structural problems that cannot be easily repaired. plus, the oil price is creeping up really fast. this will further add pressure to the selling of Rupiah. simply, there are more demand for US dollars especially with major debt obligations falling due around this time. it will be sometime. the JSX who has been the star performer in the SE-Asia market will take a big hit at the year’s closing.
In the mean time, let the market decides and eventually it will appropriately price what is a good fundamental economic reform happening in the world’s 4th most populous country.