External factors are still hurting the Indonesian rupiah, according to Indonesia’s central bank, Bank Indonesia. BI’s senior deputy governor Mirza Adityaswara cited the trade war between the United States and China as responsible for the weakening rupiah against the U.S. dollar.
The US-China trade war has also made a substantial impact on other Asian currencies. The yuan, won, ringgit, peso, and Singapore dollar have also declined against the U.S. dollar.
Adityaswara in Jakarta was quoted by kontan.co.id as saying, “the major factor that affects Indonesia and its financial market is the external dynamic market”. The governor said the trade negotiations between the world’s two largest economies are continuously being watched.
The trade war, which started last year, escalated when U.S. President Donald Trump announced via his Twitter account that he would impose higher tariffs on Chinese goods worth $200 billion. China then hit back, saying it would raise tariffs on U.S. goods worth $60 billion. Prior to this, market experts predicted that the two could strike a deal anytime soon.
Trade War Global Impact
The trade war escalation has sent world-wide markets lower. Two weeks ago, the Chinese yuan has dropped to its lowest level against the U.S. dollar since December. Moreover, the U.S. stock market has not reacted kindly. Yesterday, the Dow Jones industrial average dropped to an almost 4-month low, losing 0.69% to 25,173 points. The S&P 500 lost 0.63% to 2,784 points. Nasdaq was also down 0.69% to 7,555 points.
Domestic factors also impact the Indonesian rupiah, but still controllable, according to Adityaswara. However, the inflation rated tended to increase during Ramadan and the Idul Fitri Holiday.
The rupiah on Tuesday was down. From Rp 14,360, it came in at Rp 14,380 per US dollar, based on Jakarta interbank spot dollar rate (JISDOR).
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