The Indonesian Rupiah (IDR) may not necessarily be on the radar of most forex traders. If anyone has been keeping up with the market, they will know that the last five years have not been favorable for the IDR.
The currency is issued by the Bank of Indonesia, which is the central bank of the country and is led by a board of governors. Even though its name is derived by the Sanskrit name for silver, the currency isn’t backed by pure silver. It was introduced in 1946 during the country’s struggle against colonialism.
The early history of the IDR was faced with periods of devaluation and failed foreign exchange systems. During the rule of Suharto, the currency stabilized into the 1970s. The 1980s and 1990s faced even more inflation problems until the early 2000s. While there had been some recent decline in the currency, it has been relatively stable from a long-term historical perspective.
While the stock market had made some crazy gains recently, the currency appears to be bottoming out as of late. This may either be an opportunity for speculative investors, assuming if the currency doesn’t stagnate.
Economic Growth in Indonesia
Both government projects and a booming private sector have helped maintain this country as the largest economy in Southeast Asia. According to the World Bank, the country is set to have an annual growth rate of 5.1%.
Since the currency is now considered relatively weak, this makes the country highly enticing for investors with USD and other strong currencies. Since 2016, foreign investors have put nearly $2 billion in the country’s stocks, combating previous stock dumps.
President Joko Widodo has also made a round of reforms to ease the financial situation in the country. This may have lead to foreigners buying up debt securities, which had nearly doubled in recent years.
Trading History IDR/USD
Since the worldwide economic crisis in 2008, Indonesia was not spared by the financial doldrums. Fortunately, the currency had never had extreme variance in trade against the USD as it usually rotated between 10,000 to 14,000 to the Dollar.
The stability of the IDR depends on the point of view you want to take. If you look at a 10-year graph, it is apparent, that there is a downward trend. It is especially exacerbated if you take 2011 as a starting point.
Within the past year, the trading took a huge dip in October, but it has been rapidly recovering since then. In the past month, there is a slight downward trend with 0.00007 being the typical closing price of the IDR/USD pair.
Conclusion
Deciding to trade the IDR/USD pair should likely be considered for speculators that the currency will boom in the near future. Considering that the economy is growing faster than most other developing countries, the time of rock-bottom IDR prices may be limited. Trading prices will also depend on which forex broker Indonesia that you use. Along with marginal price differences, there are also varying trading fees involved when considering your investment.