An expert staff to the Minister of Energy and Mineral Reources (ESDM) has hinted that a number of mining companies will be hit by the weakening Rupiah, while others may enjoy the benefit of the drop of the Indonesian currency.
“The weakening of rupiah will increase expenditure of the Indonesian mining industry, especially for the imports of goods and equipments from abroad. At the same time it will benefit mining companies that export their commodities in US dollar,” Irwandy Arif said on Friday, June 21, 2024.
He cited that companies, such as State-owned coal miner PT Bukit Asam that sells their coal domestically will be hard hit by the weakening of rupiah as the company buys a lot of goods needed for production from abroad as therefore sees increased cost.
Irwandy said Indonesia is waiting for the US Central Bank, the Fed, to inject more money into the market in order to lower the interest rate.
“If the interest rate is high, they will definitely invest their money there. Once the interest rate drops again, Rupiah will strengthen,” he said.
As earlier reported, Governor of the Indonesian Central Bank (BI) Perry Warjiyo said that the weakening of the Rupiah exchange rate was impacted by high global market uncertainty, particularly related to the uncertainty of the Federal Funds Rate (FFR) or interbank interest rates by the Fed. According to Bloomberg data, the Rupiah exchange rate weakened 0.34 percent to the level of Rp 16,420 per US dollar.
This condition has an impact on high global market uncertainty while awaiting the issuance of interest rate policy by the Fed. This has made the US dollar exchange rate stronger than the currencies of developed and developing countries, including Indonesia.
“These developments, along with the high US treasury yield, led to the strengthening of the US dollar exchange rate, thus increasing the pressure to weaken the exchange rate of various world currencies and restraining foreign capital inflows to developing countries,” Perry Warjiyo told a press conference in Jakarta on Thursday, June 20, 2024.
From domestic factors, pressure on the Rupiah was also caused by an increase in demand for foreign exchange by corporations, including for dividend repatriation, he said.
