Bank Indonesia (BI) acknowledges that the rupiah exchange rate against the US dollar is still undervalued aka lower than its fair value. Currently the value moves in the range of Rp 14,200/US$.
Nevertheless, BI Governor Perry Warjiyo said that the rupiah exchange rate against the US dollar still has the potential to strengthen.
"Is our exchange rate still fundamentally undervalued? Yes, because our inflation is low, the current account deficit is low, and also our economy is improving," Perry said in a working meeting with commission XI of the House of Representatives, Wednesday (2/6/2021).
The pressures experienced by the rupiah recently were influenced by global uncertainty. On the other hand, there has been a rise in U.S. treasury yields since the beginning of the year due to accelerated economic growth in the U.S. "Of course there are potential exchange rates we strengthen, but there is also uncertainty and risk of exchange rate pressures from the global side," he said.
Bi projects the rupiah this year to be at a level of Rp 14,200 - Rp 14,600 per US dollar and next year is projected to strengthen to a level of Rp 14,100 - Rp 14,500 per US dollar.
"We will continue to do stability of the rupiah exchange rate and this is supported by our foreign exchange reserves which at the end of last month US$ 138.8 billion," he said.
Meanwhile, BI expects economic growth this year of 4.1-5.1% and next year at 5-5.5%. Inflation is still under control at 2-4% this year and next year.