No uplift in long term for Indonesian rupiah

No uplift in long term for Indonesian rupiah
Finance Minister Chatib Basri (left) and Industry Minister MS Hidayat brief journalists on Wednesday about the new fiscal incentives — that mainly center on labor intensive industries — which are part of a stimulus package to boost economic growth in Jakarta.

JAKARTA - Indonesians may have to get used to the rupiah trading at the five-digit mark against the US dollar, as monetary and fiscal authorities expect the currency to remain above 10,000 to the greenback until the end of 2014.

In his meeting with lawmakers on the proposed 2014 state budget on Wednesday, Bank Indonesia (BI) Governor Agus Martowardojo said that the rupiah could hover at between 10,500 and 10,700 throughout next year.

Such a forecast was more pessimistic than the government's. At the same meeting, Finance Minister Chatib Basri told lawmakers that the rupiah would average 10,000-10,500 throughout next year, weaker than the 9,750 per dollar assumption in the 2014 state budget unveiled by President Susilo Bambang Yudhoyono on Aug. 16.

"Our currency rate forecast of 10,500 to 10,700 per dollar is based on our study of what will be happening globally and domestically," Agus told reporters after the meeting.

"The global economy will recover next year, but there's still a possibility that the US will scale back its monetary stimulus, which will certainly affect Indonesia," he said.

A potential scaling back US quantitative easing has led to fund outflows from emerging economies, putting severe pressure on their currencies.

US Federal Reserve officials have confirmed they are "comfortable" with the plan, which has triggered a rout among currencies throughout Asia and other emerging markets.

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