Bank Indonesia: Will allow rupiah to strengthen, USD/IDR hit 21-month lows

Bank Indonesia (BI), the Indonesian central bank, will allow the rupiah to strengthen in line with market movements, but will not target any level, said Nanang Hendarsah, executive director for monetary management at BI, told Reuters in a text message on Friday. 

Hendarsah said: "will give room for the rupiah to strengthen along with market mechanisms. Fundamentally, the rupiah is not yet overvalued." 

Foreign investors were undeterred by the global uncertainty tied to the US-Iran tension and were net buyers of 5.6 trillion rupiah ($407 million) of bonds from the secondary bond market on Thursday, he said.

Separately, BI Governor Perry Warjiyo noted “The gain in rupiah shows investor confidence in the government and Bank Indonesia policies. The central bank hasn’t seen any significant impact of the US-Iran conflict on the rupiah, but it will continue to monitor all global developments, including the signing of a trade deal between the US and China”.

In light of the above comments, the rupiah rallied hard and hit the highest levels seen since April 2018 vs. the US dollar at 13,744.5. At the press time, USD/IDR drops 0.60% to trade at 13,762.5.

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