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Rupiah "OverShoot"

25 April 2018   20:55 Diperbarui: 25 April 2018   21:19 400
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Ekonomi. Sumber ilustrasi: PEXELS/Caruizp

The rupiah exchange rate against the US dollar has experienced an overshoot and undervalued weakness. The rupiah that exceeded the limits is caused by global sentiment. It means the goods and services that exist in the world are partly produced in the United Stated so that global market players are hunting for more US dollar. Trending rupiah in the number Rp 13,200-13,300 per US dollar is considered good. So if rupiah is at the number Rp 13,700 per US dollar, it is abit overshoot (Yanna, 2018). So if the United States economy has decreased, it will affect other countries. Therefore I will discuss the impact of the rupiah 'overshoot'.

The first is inflation (Azzura, 2017). Inflation is continuous increase in prices, so if the exchange rate weakness the price goods will rise. The price of goods that go up causes people to spend much more money to buy the goods with the rising prices. Why? Because producers are unlikely to sell at the same prices as the price before the exchange rate declines, if the producers sell at the same price it will incur losses. However, if the manufacturers sell by the same price then there will be a decrease in the quality of the goods sold. So the manufacturers ha two ways to sell the good, the first is by raising the price and the second one is selling at a fixed price of the quality of the goods.

The second is export (Azzura, 2017), export may gain profit and depreciation. It is profitable because the weakening of rupiah causes the value of foreign currency to be strong. So if the producers sell goods aboard, they will earn foreign currency which is high value. In contrast, export depreciation occurs when producers buy imported raw materials which will be processed into finished good. In this case, the producers have to sell at very high prices, The high prices can make the demand for export goods decline. If the demand decreases then the producers will incur losses. So if the producers want to sell goods aboard, it is better using local raw materials. By this way, the price is not too high when compared with using raw materials from aboard.

The third is trigger layoff (Azzura, 2017). One of the consequences of the weakening of rupiah is the termination of employment. Layoff caused by weakening of rupiah makes producers to spend high cost to product that will affect the increase in selling prices. The increases of selling price result in inflation and lower purchasing power of society. If the price is expensive then the community will reduce its consumption, so goods are not sold out. Consequently the producer will reduce the amount of production or even will stop. With the reduction or even the cessation of production of an industrial goods, it will reduce the number of employees. So if the company still intends to operate then the company should reduce bonuses or stop raising the salaries of its employees or can fire employees of the value of production load is high.

Dollar can affect exchange rate. If rupiah weakens it can affect inflation, export and layoffs. Weak currency values lead to high inflation and impact on concumers. Affecting export means producers will gain profit, if materials use local materials and will lose if using material from aboard, because it will be sold at high prices. Finally, layoff occur because the company wants to keep operating.

References :

Azzura, Siti. 2017. "4 Dampak pelemahan Rupiah, dari inflansi hingga PHK". merdeka.com, 12 Oktober 2017.

Yanna, Yuli. 2018. "BI akui rupiah 'overshot'". cnnindonesia.com, 2 Maret 2018.

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