At present the exchange rate of the rupiah against the dollar is Rp. 14,797.50, at the beginning of 2020 precisely on February 19, 2020 the exchange rate of the rupiah against the US dollar is at 13,667.15, until March 20, 2020 the exchange rate of the rupiah against the dollar has weakened and penetrated figure of 16,000 per dollar. Rupiah weakened around 17% in just one month. In the history of Indonesia, 2020 is the second year of the exchange rate of the rupiah against the dollar through 16,000 after the first year when Indonesia experienced an economic crisis in 1998.
The Reasons Why the Dollar will stay Strong in 2020
There are various reasons behind the causes of fluctuations in currency values, basically currencies in a country are traded and used as a means of buying and selling, for example, in the case of the exchange of the rupiah against the dollar and the exchange of the dollar against the rupiah. Exchange activities between these currencies will determine the price or exchange rate, in this case the basic concepts of economic demand (demand) and supply ( supply ) apply.
In the concept of demand and supply, if a demand for goods is high, the price of goods will tend to rise. This is the same as the case of currency exchange, when many people exchange rupiah into dollars, the demand for dollars automatically increases, so the dollar will strengthen (the dollar will appreciate against the rupiah) and the rupiah will weaken. And vice versa, when many people who have dollars want to exchange it into rupiah, it is the rupiah that will strengthen against the dollar and the dollar's price will weaken or fall. This applies to all sale and purchase transactions of any type of currency.
What is the reason why many people exchange rupiah into dollars?
Following are the factors that cause currency exchanges between countries:
1. Investment prospects
People will exchange certain currencies because of the investment prospects in a country, the better the investment prospects in a country, the more people will exchange their money into that country's currency. Investments can take various forms, for example investments in a bank in the form of deposits or deposits, investments in the real or business sector, investments in infrastructure development or investment in stocks and bonds.
When many foreign investors are investing in Indonesia, the Indonesian economic sector will experience a graph of improvement, in addition to the large number of foreign investors who invest in Indonesia can help the domestic economy, Indonesia will also have good economic and business prospects in the eyes of the world .
There are several indicators used to look at investment prospects in a country, including the stability of political and economic conditions, in general, an investor will invest in a country that is safe from various conflicts, stable politics and shows good economic growth.
The second indicator is the bank interest rate, when we want to exchange money into a certain currency we certainly expect a profit, one that can be obtained is the interest rate. When interest rates in a country are high or increase, investors will get a profit from bank interest determined by the benchmark interest rates applicable in a country, the higher the benchmark interest rate, the higher the profit or bank interest earned.
2. Export and import trade
When we buy more goods (imports) from abroad rather than selling (exports) goods abroad, the value of our currency will tend to weaken compared to trading partner countries. For example, when we buy goods from America, we will pay in rupiah and the bank will convert the rupiah into dollars, so the demand for dollars tends to increase and the dollar will strengthen. Conversely, if we export or sell goods to America, they will pay in dollars and in the transaction process the bank will convert dollars to rupiah, so the demand for rupiah will increase so that the rupiah tends to strengthen.
3. Joint consensus
Of all the currencies in the world, there are currencies that are categorized as safe haven currencies where there is a currency that is considered the strongest, most stable and relatively safe in economic turmoil, one of the currencies agreed upon as safe haven currency is the American dolat. When world economic conditions are being shaken many people and agencies are reluctant to take risks to diverge their wealth in the currencies of developing countries, or small countries whose economic and political stability experience the long-term effects of an economic crisis.
Moreover, there are many visually crucial commodities that are visually based on the US dollar, such as the price of oil, coal, gold and so on, this causes the US dollar to always be a place to anchor when the world economy is in crisis. For example, when the 2008 economic crisis began with bad credit in the United States, the US dollar remained stronger and appreciated compared to the rupiah or other currencies.
From this discussion, we will better understand why the dollar is always strong, especially at the beginning of the peak of the corona virus spread in 2020 which resulted in economic crises in various countries in the world. In this condition investors prefer to save dollars than other types of currencies, because the dollar is considered a safe haven currency that is relatively safe despite the turmoil of the world economy, because many parties who exchange currency into dollars, the demand for dollars will automatically increase.
Investors will also withdraw their investment from countries affected by economic turmoil, and allocate their money to investment instruments that are relatively safer. In 2020, many investors have also withdrawn their investments from Indonesia because of the impact of the corona virus pandemic. Investments are in the form of stocks to bonds. Because there is a massive withdrawal of investment, investors will exchange their rupiah into other currencies, especially the US dollar, this is the reason why dollar prices tend to always go up and the rupiah weakens.
