http://www.thejakartaglobe.com/business/weak-rupiah-hits-35-year-high/581493
Weak Rupiah Hits 3.5-Year High Dion Bisara | March 23, 2013 Indonesia’s currency weakened on Friday, hitting its highest level in three and a half years amid worries that the country’s external trade balance may deteriorate further. The rupiah fell to 9,743 against the US dollar on Friday — a level not seen since September 2009, as the currency edged past the previous day’s peak of 9,740, according to data from Bank Indonesia, the central bank. Meanwhile, foreign investors realized gains in their holdings of Indonesian assets, sending stocks in Jakarta down. The Jakarta Composite Index fell 1.7 percent to 4,723.16 on Friday, with foreign investors selling Rp 440 billion ($45 million) more in shares than they bought. Jakarta’s main stock gauge has gained 9.4 percent overall this year. The rupiah has weakened 0.8 percent so far this year against the US greenback, on concerns that the country’s current account deficit will widen due to weak natural resources exports and hefty fuel and capital goods imports. The dollar, on the other hand, has gained against world currencies amid signs of a US economy recovery and recurring debt turmoil in the euro zone. “Indonesia’s economy faces a quite serious twin deficit,” wrote Lana Soelistianingsih, an economist at Samuel Sekuritas, in a research note on Friday. She was referring to the condition of the current account deficit. The current account — comprising the difference in the balance of the goods and services trade, income transfers and remittances — has been in the red for two consecutive quarters. Twin deficits indicate considerable dependence on foreign funds in the form of foreign direct investment and foreign debt to cover the deficit, Lana said, noting that similar conditions had led to the 1997-98 crisis. The state budget deficit this year is set at Rp 153 trillion, or 1.65 percent of the country’s gross domestic product. Finance Minister Agus Martowardojo, who will bid to become governor of Bank Indonesia next week, said on Thursday that the deficit might in fact hit 2 percent of GDP this year, due to concerns that the nation’s fuel subsidies might exceed their budget allocation. The current account deficit reached $24.1 billion or 2.7 percent of total GDP last year. The central bank expects the shortfall to narrow in the first quarter of this year in line with the recovery of global commodity prices. “The development of private debt is worth serious scrutiny … current private overseas debt reached 49.8 percent of total external Indonesian debt, [which] amounted to $242 billion,” Lana wrote. Bank Indonesia has vowed to maintain the stability of the country’s currency and keep it close to reflecting economic fundamentals. Foreign reserves fell to $105.2 billion in February from $108.8 billion in January, according data from the central bank. Bank Indonesia has been spending some of the country’s foreign exchange reserves for various purposes, including intervening in the foreign exchange market to defend the rupiah [Non-text portions of this message have been removed]
