Forex Blog: Currency Trading News & Analysis.

September 5th 2005

Indonesia raises interest rates

The Central Bank of Indonesia has finally raised interest rates, in a move that may turn out to be too little too late. In the past month, Indonesia’s currency, the Rupiah, has depreciated 10% against the USD. Indonesia notoriously spends almost 1/3 of its annual budget on artificially fixing energy prices for its citizens vis-à-vis fuel subsidies. As the price of oil has risen, the cost of dispensing fuel subsidies has risen proportionately. In the last month, Indonesia’ current account surplus has shrunk dramatically and may soon become a deficit. The failure of Indonesia to stabilize the imbalance through appropriate monetary and fiscal policy measures irked currency traders, who responded by thrashing the Rupiah in forex markets. The Economist reports:

[The Central Bank] revealed that it had squandered one-tenth of its reserves in a vain attempt to stem the rupiah’s fall. Despite a few high-profile foreign investments, the capital account remains lamentably in the red.

Read More: Rupiah ructions

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Posted by Adam Kritzer | in Exotic Currencies, Politics & Policy | No Comments »

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© 2004 - 2023 Forex Currency charts © their sources. While we aim to analyze and try to forceast the forex markets, none of what we publish should be taken as personalized investment advice. Forex exchange rates depend on many factors like monetary policy, currency inflation, and geo-political risks that may not be forseen. Forex trading & investing involves a significant risk of loss.