Geopolitical Factor Affects Rupiah Rate: BI Governor

Jakarta (Antara) - Bank Indonesia Governor Agus Martowardojo reported that geopolitical factor was one of the causes of the current depreciation of rupiah, reaching close to Rp12,000 against the US dollar on Wednesday. "The major cause is possibly a global factor in view of the current geopolitical conditions in Iraq that have created tension and worries over a possible massive hike of oil price," he said here on Wednesday evening. He said the situation in Iraq was feared to possibly suppress the balance of trade because oil price might rise and Indonesia still imports oil. This will affect the country's current revenue. Agus said other factors that have caused the depreciation of rupiah were fear about the possibility of the interest rate in the United States to rise faster than expected due to strong inflation tendency. "In 2015, adjustment will be made in the interest rate, but the depreciation in rupiah has revealed that the tendency of inflation is strong enough to make it happen quicker," he said. Agus added that the other factors were economic development in China and Europe as seasonal increase in the demand for foreign currencies to pay dividends or foreign debt interests. "Meanwhile, the domestic factor that has affected the rupiah exchange rate is purchase of foreign currencies by retail corporations to pay their foreign obligations," he said. (*) Reported by Satyagraha