Bank Indonesia sees the rupiah exchange rate in 2021 may continue strengthening, in line with its fundamentally undervalued level.

"A low current account deficit supports the strengthening of the rupiah exchange rate, maintained inflation, the attractiveness of high domestic financial assets, and Indonesia's declining risk premium, as well as extensive global liquidity," said BI Governor Perry Wirjiyo in a statement on Thursday (21 / 1).

According to Perry, Bank Indonesia continues its stabilization policy to support the rupiah in line with its fundamentals and the market mechanism's operation through the effectiveness of monetary operations and liquidity availability in the market.

"The rupiah strengthened on the back of stabilization measures by Bank Indonesia and continued foreign capital inflows to the domestic financial market," Perry continued.

On January 20, 2021, the rupiah exchange rate strengthened 0.77% on average and 0.14% on a point-to-point basis compared to December 2020 levels. The strengthening rupiah against the dollar was driven by an increase in foreign capital inflows to the domestic financial market in line with reduced financial market uncertainty and global investors' positive perceptions of the outlook for improvement in the domestic economy.

According to Perry, domestic economic growth that improves until the end of 2020 is gradually increasing in 2021.

"Although slightly lower than the original estimate, the development of several indicators in December 2020 indicates ongoing improvement, such as increased export and import activity, improved manufacturing PMI, as well as favorable sales and consumer expectations," he said.

He hopes that the national vaccine program, which began in early January 2021, and the discipline that is still accompanied by the application of the Covid-19 protocol can support the domestic economic recovery process.