Indonesia Currency Exchange Rate

Mar 24th, 2009, in Business & Economy, News, by

The prospects for Indonesia and the rupiah facing the global economic problems of 2009.

The current financial crisis has given rise to two trends tending to strengthen the once weak US dollar almost across the board, they being

  • risk-shy American investors seek the safety of home shores and repatriate millions of dollars
  • foreign banks, especially Chinese, invest in 'safe' US Treasury bills

This exacerbates problems around the world, as lending capital is sucked into America and becomes even more scarce elsewhere.

Says Eswar Prasad, a former official at the International Monetary Fund and a senior fellow at the Brookings Institution:

This is the third wave of the financial crisis. Low-income countries are getting hit very hard. The flow of private capital to the emerging market has dried up.

In the late 1990's economic crisis in Asia as currencies fell in countries such as Indonesia demand for their (now very cheap) exports in developed countries remained strong, providing an export driven lifeline and path to recovery for the nation, as well as for Thailand.

However this time weak currencies are in tandem with falling demand for exports, putting developing countries in a very vulnerable position. In January 2009 year on year Indonesian exports fell over $5 billion in value from $12.5 billion to $7.1 billion (although imports also fell massively).

Eastern Europe is worst affected with a number of countries there thought to be on the brink of defaulting on their debt, while Eswar Prasad includes Indonesia in his list of next most at risk countries, from, again, these three factors:

  • constricted credit and capital supply
  • weak currency
  • weak demand for export goods

the others being Vietnam, the Philippines, Malaysia, Pakistan and Ecuador.

Any debt default in Indonesia, or at least the prospect of one in people's minds, would cause chaos in rupiah exchange rates. nytimes

Meanwhile Mirza Adityaswara, Chief Economist Bank Mandiri Group, applauds Bank Indonesia's policy of restricting dollar purchases of over $100,000, without an underlying transaction, as a way of defending the rupiah, which in recent days has come back from its lows of around 12,000 to the dollar.

He also suggests Indonesia needs to learn from Malaysia and Thailand, and wonders whether the much smaller fall in their currencies is due to their stronger system of foreign exchange controls, or the underlying strength of their tourism industries and their openness to foreign investment.

He also suggests these two countries are better at ensuring that the proceeds of US$ denominated export sales are actually banked in-country, whereas in Indonesia there is likely to be a big shortfall if comparing port shipment dollar value records and amounts deposited in local banks. kompas


38 Comments on “Indonesia Currency Exchange Rate”

  1. avatar Burung Koel says:

    In January 2009 year on year Indonesian exports fell over $5 billion in value from $12.5 billion to $7.1 billion (although imports also fell massively).

    Whoa, that’s huge. Although monthly figures are subject to the odd hiccup. Might pay to look at the trend when February and March figures are available.

    He also suggests Indonesia needs to learn from Malaysia and Thailand, and wonders whether the much smaller fall in their currencies is due to their stronger system of foreign exchange controls, or the underlying strength of their tourism industries and their openness to foreign investment.

    Or perhaps the extent of any domestic debt, and in what currency the debts are held in.

    One of my favourite writers, Michael Lewis, in a brilliant article on Iceland’s great meltdown:

    http://www.vanityfair.com/politics/features/2009/04/iceland200904?printable=true&currentPage=all

  2. avatar boy says:

    This exacerbates problems around the world, as lending capital is sucked into America and becomes even more scarce elsewhere.

    True, and lending capital is also scarce in US as its Banks are holding up lending. They’re f*cked up too.

    whereas in Indonesia there is likely to be a big shortfall if comparing port shipment dollar value records and amounts deposited in local banks.

    Those money are in the tiny red dot island

  3. avatar diego says:

    Thanks BK,

    I’m who is illiterate in economy, and possesses very short attention span could actually enjoy reading the article, getting to know some tidbits of iceland. The place and people sounds interestingly crazy (from what I read in the article).

    I always wanted to visit the end(s) of the world (ujung dunia), and iceland seems to be a perfect place for me (apart from the tip of argentina).

    Saludos desde nopalandia.

  4. avatar enigmatic says:

    He also suggests Indonesia needs to learn from Malaysia and Thailand, and wonders whether the much smaller fall in their currencies is due to their stronger system of foreign exchange controls, or the underlying strength of their tourism industries and their openness to foreign investment.

    I think it’s exactly the excessive openness to foreign investment that did some economies in. Especially financial hubs in Asia… Think Singapore, Hong Kong.

    Being too open to Foreign Investment puts your economy at huge risk to international events. A financial crisis in other countries is the last thing they would EVER want. That’s why these countries are in deep trouble now when the crisis hit the USA and then worldwide.

  5. avatar Burung Koel says:

    I always wanted to visit the end(s) of the world (ujung dunia), and iceland seems to be a perfect place for me

    Well, there’s a favourable exchange rate at the moment! Until they adopt the Euro.

  6. avatar sputjam says:

    This ESWAR PRASAD is a former IMF official.
    IMF forced Indonesia to do exactly opposite to what the US is doing presently.
    The exchange rate of Malaysia and Thailand has been stable for decades i.e. approximate 10baht ~ RM1.
    Singapore has been the major benefactor of indonesian exports for decades i.e. payment for Indonesian commodities payments and exports are remitted into singapore banks and never benefited indonesians.
    That is why I suggested Indonesia join in a currency board as what brunei had done pegging IDR to singapore dollars.
    Singapore monetary authority (MAS) is the actual federal reserve bank of indonesia.
    Financial hubs like singapore and hong kong suffered because the banks parents in US/Europe are dying and are forced to lay off bankers.

    DW is the culprit who supported high interest rates in Indonesia. He should study Iceland carefully to see the effect of such a regime.

  7. avatar diego says:

    at sputjam:

    Maybe I forgot… but who is DW?

  8. avatar Mr Tic Tac Toe says:

    Tn. Sputjam, Yth. :

    IMF forced Indonesia to do exactly opposite to what the US is doing presently.

    I thought i was the only one who felt this way.

    I was starting to think i was crazy, or bitter or something.
    Thankyou for your confirmation, Tn. Sputjam.

    Its still clear in my mind when IMF official (i forgot who) and soeharto signed the deal. The official looked so arrogant, almost like “ordering” soeharto to sign it. And how the recent revelations showed that bill clinton forced soeharto to do that.

    If FOX was right when saying a Neocon is a disillusioned liberal, then perhaps im a neocon now.

  9. avatar Burung Koel says:

    Banks got us into this mess. The IMF is just a bank – with the USA being one of the biggest shareholders.

    One rule for big members of the board, another rule for borrowers, I’m afraid.

  10. avatar Mr Tic Tac Toe says:

    Tn. Diego, Yth:

    Dw can be “Diego Waradona”

    Or perhaps the most logical: DragonWall.

  11. avatar Oigal says:

    still clear in my mind when IMF official (i forgot who) and soeharto signed the deal. The official looked so arrogant, almost like “ordering” soeharto to sign it. And how the recent revelations showed that bill clinton forced soeharto to do that.

    Dearie me.. and yet more revisionist history, although the fun is yet to begin in Indonesia..and even though the smart people know what is bearing down the tracks nothing will said or done until

    1… The election is over
    2… Assets have been transfered and reallocated to guess where..

    Here’s a magic number 17000 and six months

  12. avatar diego says:

    at Mr TTT:

    Ah! Women de lao pengyou!!! How can we forget him.

    What happened to him?

    Patung did you block him?

    Where’s freedom of speech?

  13. avatar TheWrathOfGrapes says:

    However this time weak currencies are in tandem with falling demand for exports, putting developing countries in a very vulnerable position.

    But Indonesia has oil and gas, and the price of oil has gone back up above $50. Provided Indonesia does not keep subsidizing the oil and gas and export more of it.

  14. avatar TheWrathOfGrapes says:

    One of my favourite writers, Michael Lewis, in a brilliant article on Iceland’s great meltdown:

    BK – heard the joke doing the rounds at Davos?

    Q: What is the capital of Iceland?
    A: $25.

  15. avatar sputjam says:

    DW is is dragonwall-the guy who thinks that 18% interest rates will be good for the indonesian economy. This guy who also exploits local labour by having three underpaid maids serving his home in Indonesia. But then, the maid thing could be due to supply and demand.

    @ WOG (sorry the punt wrath) – Indonesian does not export crude oil for some time now. Exxon was asked to leave maybe two years ago from their concession somewhere in Java. I do know that COSCO is drilling somewhere, but not sure as they were in the market for offshore vessels for their contracts in Indonesia.
    But presently, Indonesia imports more than they export as far as crude oil in concern, maybe due to excessive taxation or royalties and dues that are excessive and discourage exploration.
    The only energy indonesia export is gas and coal. Natuna being the main source for LNG.
    Smuggling of subsidise refined oil products continues in waters around singapore, where there are ready buyers. Last I heard was diesel going for USD50/MT less than MOPS. Same with kerosene, which is used primarily for lighting and cooking in the rural areas. It is mixed with low quality diesel and sold at a higher price as a higher grade diesel.

    The path taken by Obama administration seems to be the same as that done by Mahathir during the aftermath of asian financial crisis of 1997. mahathir took the bad debts under govenrment owned danaharta, and sold the assets as the market condition recovered. Obama will be doing the same for trillions of dollars worth of toxic assets in the US.

  16. avatar Brother Mouzone says:

    One of my favourite writers, Michael Lewis, in a brilliant article on Iceland’s great meltdown:

    Make that “brilliant load of goats’ swingers made up about Iceland’s great meltdown”.

    The article is largely debunked here;

    http://nymag.com/daily/intel/2009/03/reality_check_vanity_fairs_fis.html

    There’s a thin line between artistic license and just making cr@p up…

  17. avatar dragonwall says:

    DW is is dragonwall-the guy who thinks that 18% interest rates will be good for the indonesian economy. This guy who also exploits local labour by having three underpaid maids serving his home in Indonesia. But then, the maid thing could be due to supply and demand.

    The reason I am staying away is simple. Why should I waste my time discussing with people who talks nonsense. But I hope to clear the mind of this guy who always got hanged by the peg. And why are you stammering? Is.is..is..

    What caused Indonesia to devalue in 1989 from 500 to 1000 rupiah to a dollar and what happened to Indonesia between the period of 1996 and then 1998 and forward with the yoyos of the rupiahs between 6,500 to 9,000 then 8,000 to 11,000 and followed by the latest that is 8,500 to 13,000.

    Can you figure that out? You spoke so highly of your knowledge into the economics of Indonesia and yet you are unable to find out the reason why Indonesia is not improving?

    I have already told you that if INDONESIA IS TO CONTINUE THE WAY THEY ARE, FOR THE NEXT 20 – 30 YEARS INDONESIA WILL NOT GET OUT OF THEIR FINANCIAL DILEMNA.

    You think giving 18 percent as interest to attract investors is something surprising and detrimental to the economy of Indonesia? Figure that out yourself.

    One thing you failed to see is the time factor and the implementation of it in coupling with national planning. This is the failure of INDONESIA’S banking system implemented by BI and your finance minister (in small caps with intent).

    Take a calculator and start counting. And that is what I can tell you, I am not prepared to place my time elaborating on things that you might not understand because I have better things to do.

    Despite the current economy in US, most of us are doing fine unaffected, I don’t see why others can’t figure that out logically especially with those whining and sighing people like you lamenting on the demise of the Indonesian economy.

    One more thing is that you think paying a maid 500,000 per month with everything provided is underpaying? Tell me how much you pay your maid so that it will make you a better person?

    And that stupid fake latino woman still does not know how to behave himself, then I think it is about time someone fry him.

    I won’t be placing comments any longer because I have more work to do and so just forget the fish and the rod but I guess the fake latino could continue with his m…bate.

  18. avatar diego says:

    Oh geez,

    sputjam, mr.ttt, lairedion…. how many times did I tell you: don’t play jailangkung!!!

  19. avatar Aluang Anak Bayang says:

    Draganball’s great economic ingenuity: US Economic bubble bursts in year 2012 – off tangent by 4 years.

    Me, a economic novice’s advice.

    My economic forecast: The world economic meltdown will be out and over within 2 years. 🙂

    Further investment advice by myself (a novice in economic): Buy low, sell high. Now is the time to buy up properties in the US and Australia.

  20. avatar diego says:

    [deleted, admin says: stick to topic]

  21. avatar Burung Koel says:

    The article is largely debunked here;

    There’s a thin line between artistic license and just making cr@p up…

    @ Brother Mouzone

    Your link is to an article penned by a disgruntled Icelander saying that Lewis was guilty of using some very colourful examples of Iceland’s society and culture. Which is no doubt true.

    However it didn’t ‘debunk’ (or even address) the basic economic and financial issues raised in Lewis’s piece. These are generally well accepted.

  22. avatar Burung Koel says:

    You might want to check the comments section of your link, too, Brother Mouzone.

    There are lots of Icelanders agreeing with Lewis, and many more laughing at the (deliberate) humour he used.

    I like Icelanders – in fact I have all Sigur Ros’s albums and even saw Bjork live last year. She’s still weird, though.

  23. avatar Brother Mouzone says:

    Your link is to an article penned by a disgruntled Icelander saying that Lewis was guilty of using some very colourful examples of Iceland’s society and culture.

    Errr…no

    It’s written by an American journalist and he says that Lewis is guilty of making up and using factually inaccurate information and urban myths in what is presented as a serious article.

    If any one is that interested (which I rather doubt) have a look at the link.

  24. avatar Burung Koel says:

    Apologies, Moody is American, but still disgruntled.

    His period of residency coincides with the rise and fall of the banking sector, and he may therefore resent Lewis publicising the dodgy goings on. As I said, the references to some tall stories and elves etc in the article doesn’t diminish from the facts around the reasons for Iceland’s troubles. Moody doesn’t even bother trying to take on Lewis on the critical facts.

    And as some of the Icelanders have pointed out, they can see the dark humour in what Lewis wrote.

  25. avatar Brother Mouzone says:

    No sweat… the facts are well known about the meltdown in Iceland 😉 and Lewis has re-reported them largely accurately.

    The problem is the hyperbole involved; I can understand the need to make a piece of financial writing interesting but Lewis’s description of Iceland makes it sound like a cross between Beirut and Haiti. This is not reflected by the facts as reported by those living there.

    My point is that financial writers need to be careful… if they get into the habit of hyping things up and stray from reporting facts to creating and embellishing stories it could contribute to some kind of stock or housing bubble that could in turn lead to some kind of terrible economic crash…

    Ah.

  26. avatar sputjam says:

    Wasn’t there a report that says Indonesia’s economy, the largest in south east asia, will grow 4% this year despite the financial turmoil? The only two with growth this year, the other being the phillipines which has lower projected growth. The rest will be negative.
    And it has a vibrant and workable democracy? (But they have to come out with something to make vote counting more efficient)
    Yet despite this, Indoesia is seeking financial aid this year.
    The problem is the non-receipt of commodities/export payment into the country. Hence there is constant outflow of wealth, which is the main problem. This has been going on since the time of suharto, including monopolies which control trade in ammonia gas etc. which were sanctioned by the government. Get ammonia gas from plants in Lokseumawe or pekan baru, but pay into singapore bank accounts. I think those monopolies have been disbanded for good reasons.
    Those coal exports from south Kalimantan could be doing similar things. Same with timber and palm oil. Hence the poor kampung folks do not benefit from any of the commodities found in their backyard.
    The hatred for financial establishment/centres in the west may soon reach indonesian shores.

  27. avatar TheWrathOfGrapes says:

    The path taken by Obama administration seems to be the same as that done by Mahathir during the aftermath of asian financial crisis of 1997. mahathir took the bad debts under govenrment owned danaharta, and sold the assets as the market condition recovered. Obama will be doing the same for trillions of dollars worth of toxic assets in the US.

    sputjam, the only difference, and a BIG difference, is – Obama is doing it for the country with no vested interests, whereas Mahathir was doing it to save his children’s businesses, his family and his cronies.

  28. avatar ET says:

    AAB

    My economic forecast: The world economic meltdown will be out and over within 2 years.

    Further investment advice by myself (a novice in economic): Buy low, sell high. Now is the time to buy up properties in the US and Australia.

    I couldn’t agree more.
    One more advice to secure a steady income in these times of doom and gloom. Pretend to be an economic journalist or a financial analyst and sell your crap to newspapers and TV stations. Bad news sells, panic breaks out, the market gets flooded and you’re in for a nice windfall profit.

    BM

    My point is that financial writers need to be careful… if they get into the habit of hyping things up and stray from reporting facts to creating and embellishing stories it could contribute to some kind of stock or housing bubble that could in turn lead to some kind of terrible economic crash…

    Also right. People tend to blindly follow the stories made up by so-called financial guru’s and lose their common sense. Getting rich overnight is the basic tenet. Not some wordwide natural disaster or global war but overspending and overheated expectations is what got us in this mess in the first place.

  29. avatar sputjam says:

    financial newspapers and hedge fund managers work hand in hand to make ridicolous amount of money, by controlling the herd mentality of majority investors.
    did anybody from Moodys or other ratings agency got called up to congress for making fictitious ratings on sub-prime loansand other toxic assets?
    They can simply down grade indonesia and nobody can do a thing about it.

  30. avatar Burung Koel says:

    There’s a theory that there is a 30 year period to the stock market ‘boom and bust’ cycle.

    Why? Because that’s the average working life of a funds manager. After 30 years, no-one in the business can remember what a bust looked like. Everyone thinks they can just keep on making money.

    Simplistic, but interesting nonetheless.

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