In Indonesia, the official currency is the local rupee. The currency symbol Rp is used to indicate the currency . It should be noted that in financial markets such as Forex, the Indonesian rupee is referred to as IDR. In addition, this currency is often informally called Perak (“silver” in Indonesian).
The history of the rupee. Currency notes
Currently in circulation in the country are participating denominations of one thousand, two thousand, five thousand, ten thousand, twenty thousand, fifty thousand and one hundred thousand rupees. For a long period of time, the Indonesian government tightly regulated the exchange rate of the national currency.
Nevertheless, in 1987, the country's leadership changed its monetary policy and abandoned control over the national currency. It was decided to provide the Indonesian rupee with the so-called "free swimming". In addition, this unit was tied to a multi-currency basket, which included seven world currencies, one of which was the US dollar. Today, the Indonesian rupee against the dollar has a ratio of 1 USD = 13 549.32 IDR.
In fact, the Central Bank of Indonesia was in charge of the rupee quotes. When setting the currency rate , this institution took into account the position of the rupee against the US dollar. In fact, from that moment, the Indonesian rupee depended directly on the correlation of the American and Indonesian economies.
The dynamics of the Indonesian rupee
An example of this state of affairs is the 1997 situation. Then, the high inflation rate in Indonesia compared to the same indicator in the United States led to a significant devaluation of the Indonesian rupee. In addition, the local currency has lost its position in relation to other major world currencies included in the above basket of seven currency units. Also, the Indonesian rupee devalued against the ruble of the Russian Federation.
In general, we can say with full confidence that the exchange rate of the Indonesian currency directly depends on the ratio of the annual growth level of the economies of Indonesia and the United States. And since the US economy is closely connected with the economies of other developed countries, the rupee quotes in relation to the main world currencies fluctuate depending on the macroeconomic indicators of these states. The exchange rate of the Indonesian rupee to the ruble also depends on these trends.
Other factors affecting the position of the rupee
It will be useful to say that the economy of the United States of America is not the only factor influencing the situation of the Indonesian rupee. The Indonesian rupee is heavily dependent on inflationary processes in the state’s economy. In addition, the position of the rupee depends on Indonesia's gross domestic product , growth or decline in production, liquidity, the situation in the main financial institutions of the state. The rupee rate is also influenced by periodic crisis events in the country itself and Southeast Asia.
Rupee Maintenance Tools
The Central Bank of Indonesia uses several tools to maintain a stable exchange rate of the national currency. The traditional way is to buy surplus Indonesian rupees, which leads to a deficit and, accordingly, an increase in the national currency. In addition, a financial institution also uses such a mechanism as increasing the liquidity of the domestic banking system.
It should be noted that the Central Bank of Indonesia has the ability to change the refinancing interest rate, based on the situation in the markets. Given the inefficiency of all the leverage that the main financial institution in Indonesia has, it is necessary to resort to the help of international organizations. For example, the International Monetary Fund. To date, the Indonesian government has twice resorted to the help of this authoritative international institution.
Rupee position today
In 1998-1999, a major financial crisis occurred in Asian countries. At that time, the quotes of the Indonesian rupee against the US dollar fell by 30%. The Indonesian government had to resort to IMF assistance to stabilize the financial situation in the country. By the way, it will be said that the Indonesian rupee is considered a freely convertible currency. But, despite this fact, the risks of this currency are among the highest in the world. It should be noted that to date, the exchange rate of the Indonesian rupee to the ruble is 1 RUB = 214.30 IDR.
Indonesia does not have a very developed economy, and the financial system of the state is not reliable and stable. In addition, the national currency of developed countries is not tied directly to the main reserve currency - the US dollar. The Indonesian rupiah in this regard is very different from other units. In 2013, the government planned to denominate the Indonesian rupee. The goal was to get rid of excess zeros in the value of local currency banknotes. It should be noted that such a procedure is a standard wellness measure and allows you to create conditions of order in the monetary system of the state. But such measures are not a panacea and do not guarantee protection against risks in the future.