Bank Indonesia: IDR to Strengthen in 2021 as Economic Recovery Expected from Q3 2020

With the anticipation of an economic recovery from the July-September 2020 quarter (Q3 2020), Bank Indonesia (BI) expects a further strengthening of the Indonesian Rupiah (IDR) in 2021. Perry Warjiyo, BI Governor, stated that the IDR would strengthen further to reflect its fundamental value (given that it is currently fundamentally undervalued), with an attractive domestic yield supporting the economic recovery.

According to local media reports, March 2020 saw the IDR depreciate 18% in that month itself, with a spike in off-risk sentiment due to the uncertainty created by COVID-19. In order to stabilise the IDR, BI responded by purchasing government bonds to the value of IDR 166.2 trillion (USD 11.6 billion) from foreig...