These are critical times for the Rupiah in the Jokowi era, how high will it reach?

Jakarta, CNBC Indonesia -NOTThe rupiah exchange rate continues to move in a downward trend and is at the level of IDR 16,400 per US dollar. The weakening of the rupiah worries many parties, including President JokoWidodo (Jokowi).

The rupiah has strengthened against the US dollar as foreign investors' funds evaporate from Indonesia's financial market.

Report of Refinitiv, the rupee closed up 0.3% at IDR 16,390/US$ today, Monday (24/6/2024). Despite its strengthening, the Garuda currency is still in a downward trend. The Rupiah reached its weakest point, namely 16,470 IDR/US$. If we calculate the period from when Jokowi ruled Indonesia on October 20, 2014 until today, the rupiah has weakened by 36%.

One of the causes of the rupiah is the flight of foreign investors from the Indonesian financial market.

Based on transaction data June 19-20, 2024,Bank Indonesia (BI) noted that foreign investors made net sales of IDR 0.78 trillion, consisting of net sales of IDR 1.42 trillion in the stock market, net purchases of IDR 0.45 trillion of government securities (SBN) and net purchases of IDR 0.19 trillion in Bank Indonesia Rupiah Securities (SRBI).

Throughout 2024 until June 20, foreign investors were recorded as net selling IDR 42.10 trillion in the SBN market, net selling IDR 9.35 trillion in the stock market, and net buying IDR 117.77 trillion on SRBI.

This record outflow of foreign investors breaks the trend of net foreign inflow for six consecutive weeks that has occurred since the first week of May 2024. This outflow of foreign funds has put pressure on the rupee which has not attenuated so far.

Finance Minister Sri Mulyani explained that the pressure on the rupee was mainly caused by global factors, such as the strength of the US economy which made it difficult for the central bank to reduce the Fed's benchmark interest rate Fund Rate. Furthermore, there are differences in the direction of interest rates between developed countries, where the European Central Bank has effectively lowered its benchmark interest rate.

So, how is the rupee moving and what are the causes of the rise and fall of the Garuda currency?

October 20, 2014: Start of Jokowi's leadership

When President Joko Widodo (Jokowi) took office on October 20, 2014, the exchange rate of the rupiah to the US dollar was approximately IDR 12,030. Global and domestic economic conditions at that time were quite stable, although it faced several challenges, including a current account deficit and dependence on foreign capital flows.

The Rupiah rose by 1.16% the day before President Jokowi's inauguration and strengthened by 0.62% on the day of the inauguration.

October 9, 2018: US bond auctions and US-China trade war

The Rupiah collapsed for six consecutive days from early October to October 9, 2018, with a total weakening of 2.13%. On October 9, the rupiah collapsed to IDR 15,225 per US dollar. This position was the lowest throughout the beginning of the Jokowi era until October 9, 2018, four years.

This weakening occurred against the backdrop of a strengthening U.S. dollar, fueled by the auction of large quantities of U.S. government bonds offering attractive yields for investors.

This situation caused a sharp increase in demand for dollars, affecting the currencies of developing countries, including Indonesia. Apart from this, this era marked the beginning of the trade war between the United States and China under the leadership of Donald Trump.

The trade war is increasing global uncertainty and investors are choosing to exit emerging markets like Indonesia.

March 2020: Impact of the Covid-19 pandemic

The Covid-19 pandemic has had a major impact on the global economy and Indonesia is no exception. In one month, the value of Garuda currency fell by 13.7% in March 2020.

The decline was triggered by a sell-off in Indonesia's financial market, where foreign investors withdrew their funds from stock and bond markets, causing large capital outflows and further pressure on the rupiah.
Global uncertainty, shutdown of economic activity around the world, politics confinement In a number of countries, the lack of a vaccine has caused the rupee to collapse.

On March 23, 2020, the rupiah exchange rate fell to Rp 16,550 per US dollar, the lowest since the 1997/1998 currency crisis. This position is also the weakest in the Jokowi era so far.

March 13, 2022: The Fed raises interest rates

In March 2022, the Fed began raising its benchmark interest rate by 25 basis points, ending the era of low interest rates. This measure was taken to suppress inflation which had risen sharply in the United States.

This policy caused a return of capital to the United States and put pressure on the currencies of developing countries, particularly on the rupee. On November 21, 2022, the exchange rate of the rupiah will be IDR 15,710 per US dollar.

November 21, 2022: Global economic dynamics

On November 29, 2022, the rupiah exchange rate was IDR 15,740 per US dollar, the lowest since the Covid-19 pandemic era.

The rupee exchange rate has declined since August, then continued in September, from October to November 2022 with a weakening of 5.7%. This weakening was caused by the very aggressive interest rate policy of the Fed, which increased interest rates by 75 basis points between June and November 2022.
The Fed also continues to make statements warmonger which gave birth to the King Dollar phenomenon.

November 1, 2023: weakening trend continues

On November 1, 2023, the rupiah weakened to Rp 15,930 per US dollar, the lowest level since the Covid-199 pandemic. Several influencing factors include high inflation data in the United States and the Fed's interest rate policy. warmonger. On the other hand, the slowdown in the Chinese economy is also having a negative impact on global financial markets, adding pressure on the rupee.

Until June 21, 2024, the rupiah exchange rate continues to be under pressure and is at the level of IDR 16,445 per US dollar. Finance Minister Sri Mulyani said the pressure was mainly caused by global factors, including the strength of the US economy and the Fed's restrictive monetary policy. Apart from this, foreign capital outflows have also contributed to the weakening of the rupee.

From the start of Jokowi's term until mid-2024, the rupiah exchange rate has seen quite significant fluctuations, influenced by various global and domestic factors. From IDR 12,030 per US dollar in 2014 to IDR 16,445 per US dollar in June 2024, the rupiah weakened by 36% due to uncertain global economic dynamics, including the COVID-19 pandemic, monetary policy of the Fed and China's economic situation.

This shows the vulnerability of the currency to changes in global economic policies and conditions, so appropriate strategies and policies from the government and monetary authorities are required to maintain the stability of the exchange rate.

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