While Indonesia’s rupiah has gone from being one of the worst-performing currencies in 2018 to the second-best performer this year because of expectations of the Fed being on hold, it called for vigilance as the U.S. economy could accelerate in the second half and lead to tightening again. Indonesia's rupiah bounce back.
Southeast Asia’s largest economy was hit hard in 2018 by an emerging-market rout, which saw its rupiah fall to a two-decade low against the dollar, prompting the government to adopt measures, including higher tariffs on some goods. The central bank also raised interest rates six times to stem the market rout.
The recent softening of global economic growth is “strongly welcome,” Indonesia’s investment chief told CNBC Wednesday, warning of financial risks that had been building up in China and beyond. Indonesia's rupiah bounce back.
The previously globally synchronized economic boom was built on some rising financial risks, particularly an out-of-control shadow banking sector in China and a bubble in technology shares and investments. The correction in technology stocks and the deleveraging campaign in China, which might be causing a slowdown, is strongly welcome in Indonesia.
Indonesia is the largest economy in Southeast Asia, but it’s seen a change in attitude from dominant economic powerhouse China. Foreign direct investment into Indonesia from emerging markets like China slowed last year, Bank Indonesia data from the second quarter of 2018 showed.
(source: Bloomberg/Gulf Times)