The Need to Spend More

The ongoing pressure on the rupiah, which exceeded the Rp13,000 level last week, reflects the adverse impact of the world's two largest economies on our currency. And with the trend of these two countries not looking too favorable for the rupiah, it is important to think about measures that are under our control.

The US economy is the only global economy that is showing signs of decent growth. But the inflation that normally follows points to a potential rise in interest rates. Unfortunately, this makes the US dollar attractive, translating into weaker other currencies, a trend which has been going on for some time. A rise in US interest rates is a matter of time, whether it is done mid or the end of this year. The uncertainty about the robustness of the US economic recovery and a still weak inflation, gives us a potential delay in the US interest rate hike policy. This is why market players are closely following any new US economic data that comes out to anticipate the movement of other currencies.

May 19, 2015