Market Pulse: A Busy Start In 2017

As we enter 2017, the government has been busy seeking ways to stabilize the rupiah. With the Federal Reserve raising US dollar interest rates late last year, other world currencies, including the rupiah, have weakened. Our currency, which in the third quarter of last year averaged about Rp13,100 per US dollar, closed the year at Rp13,400. Unfortunately, the rupiah will continue to face pressure, given the Fed's plan to further raise interest rates this year.

It is no surprise that the government recently allowed mining companies to export their mineral ores. This is to increase exports and foreign exchange earnings, to help stabilize the rupiah. Previously, the government banned mineral exports to encourage mining companies to go up the value chain and build the smelter production phase. Under the new arrangement, 70 percent of ore production is allowed for exports, while the remaining is required to be sold to local smelter companies. Currently, there are about 30 plus local smelter facilities, some in various phases of construction, a few already completed.

January 24, 2017