Such rupiah depreciation is not caused by weaknesses in the Indonesian economy, but by uncertainties about president-elect Trump's future economic and political policies. But what seems certain is that Trump will focus on "what's best for the US economy" (America First-policy) rather than worrying about the impact of US policies on the international environment. This context gives rise to a jump in US inflation and thus a stronger US dollar. Therefore, President Widodo believes that the rupiah versus US dollar exchange rate will increasingly fall out of tune with the real economic fundamentals of the Indonesian economy.

After the 2016 US presidential election in November, the rupiah depreciated about 2 percent against the US dollar (although over the past couple of days the rupiah gained some ground), igniting some negative sentiments about the Indonesian economy. However, Widodo says that if we would compare the rupiah's performance with the euro, renminbi or yen, then we would see a different (and much more positive) picture.

Widodo added that - although the USA is not Indonesia's largest trading partner - the US dollar is still always used for import-export payments. However, trade with the USA accounts for only 9-10 percent of Indonesia's total trading activities. China, the European Union and Japan are all bigger trading partners of Indonesia and therefore it would make more sense to use their currencies as benchmarks.

Indonesian Finance Minister Sri Mulyani Indrawati agreed  with Widodo's statements and she added that it is better to compare the rupiah to a basket of currencies (Special Drawing Right, SDR)) rather than solely against the US dollar in order to obtain a less distorted picture.

Today (07/12) the Indonesian rupiah extended its rally, appreciating 0.28 percent to IDR 13,333 per US dollar (Bloomberg Dollar Index). The rupiah has now appreciated strongly since the start of December. This strong performance is attributed to rising commodity prices such as coal and oil (the OPEC's recent production cut agreement contributed to this), expectation of fund repatriations into Indonesia under the tax amnesty program, and the peaceful anti-Ahok demonstration in Jakarta on Friday (02/12).

Indonesian Rupiah versus US Dollar (JISDOR):

| Source: Bank Indonesia