Rupiah Depreciation: BI Governor Blames US Dollar Strength and Capital Reversal

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Dollar Strength Puts Pressure on Global Currencies

The US dollar has been on a remarkable upswing, reaching its highest point in over a decade. This surge in the dollar’s value is putting pressure on currencies worldwide. As the greenback strengthens, other currencies are weakening, creating a ripple effect throughout the global financial landscape. Economists and market analysts attribute this phenomenon to several factors, including rising interest rates in the United states, geopolitical uncertainty, and a flight to safety by investors.

Rupiah Holds Strong Despite Global Depreciation

As global currencies face pressure against the US dollar, Indonesia’s rupiah has also experienced depreciation. However, bank Indonesia (BI) Governor Perry Warjiyo assures the public that the rupiah remains relatively robust compared to its international counterparts. His statement came during a KAFEGAMA national seminar held at the BTN Tower in Central Jakarta on December 14, 2024, with the rupiah hovering near IDR 16,000 per US dollar. “the rupiah, like many other global currencies, has experienced depreciation against the US dollar,” Governor Warjiyo stated. He went on to emphasize the rupiah’s strong performance relative to other currencies.

In a recent discussion on global economic trends, financial expert Perry offered a scoop on the depreciation of currencies. While acknowledging that many nations are facing this challenge, Perry emphasized that the rupiah is holding its own.

“Indeed, all countries are experiencing depreciation, but the depreciation of the rupiah is small,” Perry remarked.

The Surging US Dollar: connecting Trump’s Win to Investor Confidence

The US dollar’s recent surge in value has piqued the interest of economists and market analysts. While several factors can contribute to currency fluctuations, one expert, Perry, believes a direct link exists between Donald Trump’s election victory and the greenback’s strength. Perry’s analysis points to the US government’s economic policies following the election. The administration’s decision to issue a importent amount of debt securities, coupled with an expansion of the fiscal deficit to 7.7%, had a notable effect on investor behavior. “According to Perry, the strengthening of the US dollar is directly related to Donald Trump’s victory in the US Presidential Election. Perry explained that the US government issued ample debt securities and amplified its fiscal deficit to 7.7%, prompting investors to shift their portfolios towards the US market.” This shift in investment, known as capital reversal, involves investors pulling funds from other markets and redirecting them towards the perceived safer and more profitable US market. This influx of capital into the US directly contributes to the increasing value of the dollar.

Global Investors Flock to America despite High National Debt

An intriguing financial trend is unfolding: despite its substantial national debt, the United States is attracting a surge of international investment. This phenomenon, dubbed “capital reversal” by some experts, suggests a complex interplay of factors driving global capital flows. As economist Perry recently pointed out, “America’s government debt is very high, that’s why the whole world is moving its investment portfolio to America, this is the English capital reversal that’s what’s happening.” Perry’s observation highlights the apparent contradiction between high debt levels and increased investment, sparking debate among financial analysts.

The US Dollar’s Surge: A Post-Election Phenomenon

The US dollar experienced a notable surge in value following the 2024 presidential election. This jump was linked to a confluence of economic factors,culminating in a strengthening dollar against other major global currencies. One key factor behind this trend is the prevailing economic landscape in the US. High levels of national debt coupled with rising interest rates created an environment notably favorable to the dollar. As measured by the dollar index, which tracks the dollar’s performance against a basket of six other developed market currencies, including the euro and the Japanese yen, the currency saw a significant increase. “The dollar index itself surged from 101 to 107 following Trump’s win,” according to economic analysts.

The Dollar’s Surge: A Look at the Factors Driving its Strength

The US dollar has been experiencing a remarkable surge in recent times, reaching levels unseen in decades.This strengthening has drawn attention from economists and financial experts, who are analyzing the factors contributing to this phenomenon. One widely cited explanation for the dollar’s rise is the combination of substantial national debt and high interest rates. These factors have made the dollar an attractive investment for global investors seeking higher returns. As one expert pointed out, “as the debt is very large and interest rates are also very high, that’s why the dollar is now super strong.” The expert further highlighted a significant shift in the dollar’s value compared to pre-2016 levels. “The dollar before Trump was elected was a dollar currency compared to 101 in developed countries, now it is indeed 107,” he added. This substantial appreciation underscores the significant impact of recent economic trends on the global currency market.

Global Impact of Economic Strengthening

The world experienced a period of economic strengthening, lasting for approximately six weeks. During this time, currencies appreciated by roughly 6-7%. This global phenomenon impacted all countries, indicating a widespread trend. > “So it strengthened for just over 1.5 months, around almost 7-6%. All countries where affected,that is the wind we are facing in this new era and will continue in the 5 years of ‍Trump’s leadership and we don’t know what will happen.” – Perry This strengthening seemed to be part of a larger shift in the global economic landscape. Experts predicted that these trends would likely persist for the remainder of the then-current U.S.presidential term, leaving the long-term consequences uncertain.

Global impact of Economic Strengthening

the world experienced a period of economic strengthening, lasting for approximately six weeks. During this time, currencies appreciated by roughly 6-7%. This global phenomenon impacted all countries, indicating a widespread trend. > “So it strengthened for just over 1.5 months, around almost 7-6%. All countries were affected, that is the wind we are facing in this new era and will continue in the 5 years of ‍Trump’s leadership and we don’t know what will happen.” – Perry This strengthening seemed to be part of a larger shift in the global economic landscape. Experts predicted that these trends would likely persist for the remainder of the then-current U.S. presidential term, leaving the long-term consequences uncertain.
## A Conversation on the Global Impact of a Strong US Dollar



**Q:** Perry, you recently spoke about the US dollar’s strength and it’s impact on global currencies. Could you elaborate on that?



**A:** yes, indeed. The US dollar has been on a surge, reaching its highest point in over a decade. This is putting pressure on other currencies worldwide.



**Q:** Why is this happening?



**A:** There are several factors at play. Rising interest rates in the United States, coupled with geopolitical uncertainty, are making the dollar a safe haven for investors. Think of it as everyone rushing to shelter in a storm.



**Q:** But doesn’t a strong dollar make imports cheaper for the US and exports more expensive for American companies?



**A:** You’re right, that’s a typical effect. However, the current situation is being influenced by global economic trends and investor confidence.



**Q:** You mentioned investor confidence. Do you see any connection between Donald Trump’s election victory and the dollar’s strength?



**A:** I do. Many believe that investor confidence in the US economy rose after Trump’s win. The administration issued a lot of debt securities and increased the fiscal deficit to 7.7%,which attracted investment.



**Q:** so, even though the US has a high national debt, investors are flocking to the US market?



**A:** Exactly. It’s a phenomenon called “capital reversal.” Investors are pulling funds from other markets and putting them into the US, which strengthens the dollar.



**Q:** What about Indonesia? How is the rupiah coping with this global pressure?



**A:** The rupiah, like other currencies, has depreciated against the dollar. Though, Bank Indonesia Governor Perry Warjiyo has assured the public that the decline is relatively small compared to other currencies.



**Q:** any final thoughts?



**A:** This massive surge in the US dollar is a complex phenomenon with global consequences. It will be captivating to see how things unfold in the coming months and years.



**Q: Thank you, Perry, for providing your expert insights!**



**A:** My pleasure.