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Currencies
INDONESIAN RUPIAH
Introduction | Overview | Structure | History | Factors affecting change in exchange rates | Daily trend of Indonesian rupiah | Weekly trend of Indonesian rupiah
Introduction


Rupiah or rupee is the name given to the ancient currency unit that is still in use in a few Asian countries with most important among them being India. Etymology suggests the word rupiah means a silver coin and is derived from the Sanskrit language word "rupyakam". Indonesia also uses rupiah as its national currency since 1949 when it replaced the Dutch East Indies guilder. It is also called "perak" locally that again means "silver" in Bahasa Indonesia language. The currency is depicted with the symbol "Rp" and the subunit for the currency is known as "sen". According to ISO 4217 regulation, the currency code of Indonesian rupiah is IDR and the numeric code for the same is 360.

Overview


Indonesian rupiah is one of the weakest currencies in the world. The currency faces high fluctuations with even slightest of movements in the world market and issues like terrorism, oil prices, domestic sovereign conditions, religious issues, fluctuations in the US market influence the currency value far too much. Financial crisis in Asia in 1997 that hit Indonesia worst among all the Asian countries, terror attacks in Bali in 2002 and the catastrophic tsunami in 2004 served as a blow to the Indonesian economy that is still trying to recover from the aftermaths. Inflation has been a continued risk for rupiah and has devalued the currency from around Rp 3000 to US$ 1 in the 90ís till around Rp 9500 to US$ 1 in 2001-02. Some economists believe that the country should go for outright dollarization of the currency, leaving the floating rate regime it has been using, as it would provide it with a much stable currency and a reserve bank system.

Still, last few years have seen the Indonesian rupiah making scanty improvements. But it is still quite an unsafe alternative for investing your money on it as per the experts. Also, the country has got restrictive plans in context currency trading plans so as to minimize speculation and for economic reforms. Anyhow, Indonesian rupiah is a freely convertible currency, the import and export limits in the case of local currency being amount of 100000000 rupiah. A declaration is required in context of foreign currency transfer for amounts exceeding 100000000 rupiah.

Structure

Currently, the rupiah in circulation in Indonesia is the second version of the currency ever issued. The first version of Indonesian rupiah was replaced by the new version @ 1 new rupiah = 1000 old rupiahs in 1965 due to the rampaging inflation. The role of central bank in Indonesia has been performed by Bank Indonesia since 1953 when it was established, though for a long time, the powers of the bank were restricted but the bank redeemed its operations in 1999. The coinage that circulates throughout the country includes coins in 6 denominations that are Rp 25, Rp 50, Rp 100, Rp 200, Rp 500 and Rp 1000. The first issue of coins of the new rupiah made in 1970 has been totally withdrawn from the market but the second series issued from 1991 till 1998 is still in circulation along with the current series issued 2003 onwards. The obverse sides of all the coins depict the national symbol, garuda, a mythical bird with outstretched wings. The obverse sides of the coin possess different symbolic images embossed on them, mentioned in details below
  • Rp 25 - Pala fruit

  • Rp 50 - Kepondang bird
  • Rp 100 - Kakatua raja
  • Rp 200 - Balinese Jalak bird
  • Rp 500 - Jasmine flower
  • Rp 1000 - Oil palm

The bank notes too, are available in two forms in the Indonesian market, one belonging to the 1998-2001 series and other belonging to the current 2004-2005 series. The notes prior to 1997 had been withdrawn from the economy. The denominations printed on paper currency sums up to 8 denominations with their respective predominant colors are Rp 100 (Red), Rp 500 (Green), Rp 1000(Blue), Rp 5000 (Green), Rp 10000 (Purple), Rp 20000 (Green), Rp 50000 (Blue) and Rp 100000 (Red). They show images on both their sides symbolizing the tradition and culture of Indonesia as well as the important people related to the history of the country. The list below is provided with the details of the images

  • Rp 100 note - Phinsi boat on the obverse and Krakatoa on the reverse side

  • Rp 500 note - Orang Utan on the front side and traditional house at Kalimantan on the backside
  • Rp 1000 note - Portrait image of Captain Pattimura on the front side of the banknote and view of the Tidore Island on the reverse
  • Rp 5000 note - Picture of Tuanku Imam Bonjol on the front and an image of a woman weaving on the backside of the note
  • Rp 10000 - Sultan Mahmud Badruddin IIís portrait on the obverse and picture of Segara Anak on the reverse side of the note
  • Rp 20000 - Image of Otto Iskandardinata on the front side and a tea plantation on the backside of the note
  • Rp 50000 - Portrait image of I Gusti Ngurah Rai on the front and a temple in Bali on the reverse side of the note
  • Rp 100000 - Images of Sukarno and Mohammad Hatta on the obverse of the note and the building of Peopleís Consultative Assembly on the reverse side

The bank also issued plastic money in the recent past, first one in 1993 celebrating the silver jubilee of economic development, second one in 1999 having face value Rp 100000 to eliminate counterfeiting of the paper currency but the bank notes didnít get any popular due to difficulty with counting of the notes by the counting machines.

History


Before Indonesia became an European colony, coins made of gold, silver, bronze and tin prevailed under the influence of Indianized kingdoms, Chinese and Arabs as the currency used in daily exchange transactions. Imported Chinese bronze coins served as the official currency of Indonesia in the 13th century. The coming up of the European troops in Indonesia made way for a number of currencies that were brought from various countries of the world including gold coins from Portugal, silver dollars from Mexico and Peru, Japanese gold coins and Indian rupees. The Dutch occupied the country and renamed it as Netherlands East Indies in the beginning of the 17th century. The East Indies adopted guilder as its official currency and Netherlands had to make special issues of currency for its colony. Guilders were divisible in 30 stuyvers and 120 duitens.

The other currencies like Spanish silver dollars and Indian rupees continued to circulate along with the guilders. In 1828, the Javasche bank was established and in 1854, guilder was made to adopt cent as the decimalized subunit of the currency. The guilder sustained to be the national currency till 20th century and in 1936, the currency dropped the gold standard. In 1942, during the World War II, Japan took over the Dutch colony and issued its own Military yen, which was denominated in guilders but it got stuck in the inflation flow and depreciated drastically. Guilders were taken over by rupiah as the national currency but even it didnít help the cause and continued to depreciate. After the world war was over, Indonesia declared their independence in 1946 but officially it became free in 1949.

Till 1949, all other currencies were withdrawn from the economy and the Indonesian rupiah prevailed throughout the country. Still, the old rupiah had not escaped from inflation and devaluation and as a result in 1965, it was replaced by the new rupiah @ 1 new rupiah = 1000 old units of old currency. Also, some Indonesian provinces as Riau Archipelago and Irian Barat were using different currencies i.e. Kepulauan Riau rupiah and Irian Barat rupiah before the coming up of new rupiah but were replaced by the Indonesian rupiah in 1964 and 1971 respectively.

Factors affecting the exchange rates between two countries


The volatility in the foreign exchange rates depends upon a numerous macro economic factors that have different degrees of importance to different economies of the world. Some special and exceptional factors affecting the rates may also exist in the case of different countries. Following are shown the common factors on which the foreign exchange rate depends

  • Flow of imports and exports between the countries
  • Flow of capital between the countries
  • Relative inflation rates
  • Fluctuation limits on exchange rate imposed by the governments of the countries
  • Merchandise trade balance
  • Rate of inflation in the country
  • Flow of funds between the countries for the payment of stock and bond purchases
  • Relative growth
  • Short term and long term interest rate differentials
  • Cost of borrowings
 
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