The more unstable a country is, the more its currency will depreciate. And Indonesia seems to be feeling the exact impact on its currency, the Indonesian Rupiah (IDR).
The rupiah fell 1 percent to 10,230/U.S. dollar immediately after the bomb blast at two Jakarta hotels which killed 9 people. It is really a regretful incident as the Indonesia has just went through an election that resounding gives President Susilo Bambang Yudhoyono a strong mandate, with hopes that this will quicken reforms in Southeast Asia’s largest economy and stabilising the Indonesian Rupiah.
Since the Bali incident, Indonesia has not seen a major bomb blast for several years. Compared to the last incident in Bali, the Indonesian people are better prepared this time round, with a faster reaction in terms of media handling, treating of the injured and the moving on factor – people adopting their daily routine as usual.
As such, while the bomb blast incident is a short term dent to the Indonesian Rupiah, Indonesia’s economic fundamentals are still considered strong. Unlike Singapore which has seen a shrinkage in growth, Indonesia is still able to grow their economy at roughly 3.5% despite the economic/financial crisis and this long term trend may yet continue.
Therefore, the Indonesian Rupiah (IDR) is still likely to stabilise and strengthen in the long term against the US Dollar (USD). Since that unfortunate bomb blast in Jakarta, the Rupiah has recovered some of the loss. Currently, 1 U.S. dollar compares to 10101 Indonesian rupiahs. The Indonesians will be hopeful that the Indonesian Rupiah (IDR) can trade below 10,000 levels. That may come soon, unless another bomb blast occurs.