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The Indonesian Rupiah declined over the last couple of weeks substantially. This week it even hit a new 7-year low of less than Rp 12.000 for 1 Dollar, exchange rates not seen way back in 2001.

Just this week it lost almost 7% of its value against the US Dollar, while the exchange rate to the Euro remained more stable.

While that is certainly good news for Travelers and Expats in Indonesia with assets in US Dollar, the Rupiah is coming down pretty fast.

So what’s the reason?

On Wednesday, Bank Indonesia Senior Deputy Governor Miranda Goeltom said, that Indonesia will require companies and individuals based in the nation to seek approval for foreign-exchange purchases of more than US$100,000 a month.

This caused some disturbance among currency traders. Traders and Banks kept hoarding US Dollar.

“The market and both local and foreign banks are assessing what the short-term implications are in the change in rules” for the rupiah, said Enrico Tanuwidjaja, an economist in Singapore at Oversea-Chinese Banking Corp, the nation’s third-largest bank. “Plus there are so few parties willing to let go of their dollars while demand is still pretty high.”

“Once the rupiah hits below 11,000, many want to buy the U.S. dollar,” said Lindawati Susanto, head of currency trading at PT Bank Resona Perdania in Jakarta. “Even though it’s just the beginning of the month, businesses are afraid the rupiah will weaken. They want to keep dollars for payments.”

Bank Indonesia will keep entering the market to prevent a steep decline in the rupiah, Deputy Governor Hartadi Sarwono said. Inflation is as well expected to go down next year, which should help the Rupiah in the long run.

The trend is your friend!

It seems to me that it’s more down to psychology, as economically there isn’t a sharp decline in sight. Politics, especially Prime Minister Mr SBY look stable and on track as well.

Another argument – just 2 days ago a report from US intelligence agencies concluded that there will be an end to the political and economical US Dominance by 2025 and other populous nations – Indonesia was officially mentioned, besides India and China – will gain more traction.

So, like with all psychology-based trends, it looks like those drastic exchange rate slides will probably be short-lived.

There seems to be no substance behind a serious and continuous devaluation of the Rupiah against the Dollar – but that’s my very own personal opinion.

Today 1 Euro buys you 15.150 Rupiah, while 1 US Dollar gets you 12.100 Rupiah.

Here are 6 Tips what you can do, to benefit from the lower Rupiah now:

• If you have a Bank Account in Indonesia and US Dollar income, transfer US Dollar to exchange them into Rupiah locally now
• If you are located in Indonesia and run an Online Business with Paypal or Google Income, claim that cheque or bank transfer now to get better exchange rates when cashing in
• If you are traveling in Indonesia, but have a US Dollar Bank Account at home, withdraw Rupiah via your Bank Card from an ATM near you to enjoy favorable Exchange Rates
• If you carry US Dollar in Cash with you while traveling in Indonesia, get to an official Bank and exchange them into Rupiah. Avoid Money Changers who publish fantasy rates
• If you are an Expat in Indonesia and plan to buy that car, motor scooter or paying your year rental of your house, don’t wait too long with that
• If you’ve never been to Indonesia, but always wanted to – now it’s the time. Book that flight and enjoy this country of plenty. You will get the most bang for your buck right now!

My friend Jerm in Bali, who is running an Online Business, was celebrating last time I called him, that the Greenback buys now many more Rupiah to support an easy lifestyle in Indonesia.

He can probably find easily some new gadgets to spend some of the extra Rupiah on.

What will you do?

Does the declining Rupiah affect you and how will you react on it?

What do you think, will the current trend be a long one or short-lived? Or are you currently located in a different country and only follow the trend from afar? Ooops, that’s me!

Anyway – as always – the comment form is your friend!

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written by Chris