JAKARTA ~

Bank Indonesia warned of potential currency war as a result of the U.S. central bank’s plan of periodical adjustment of its benchmark interest rate.

“I foresee in the coming three years there would always be currency war because if the US interest rate would be raised periodically, certainly it would have impact on the currencies of other countries and each one of the countries would seek to maintain the competitiveness of its currency,” BI Governor Agus Martowardojo said on Monday night.

Currency war is a condition in which each country deliberately weakens its currency in a bid to shore up exports and redress trade balance, Agus said.

He said currently the world is experiencing a phenomenal rise in the value of the US dollar causing depreciation of the currencies of various developing economies with long term risks.

“Now the pressure is deeper than we are facing, but it is all a reaction from risk on and risk off abroad. I see that indeed we have to be wary and be prepared to face this,” he said.

For that purpose, in short and mid terms, BI would seek to maintain the stability of rupiah to keep the market players from losing confidence in the country’s economy, he said.

“Under extreme pressure, we will see that the volatility remains within acceptable level to keep the market confidence,” he said, adding the market should know that BI is always there to maintain rupiah stability.” He predicted that rupiah, which has lost much of its value, could recover and would regain stability after June.

Rupiah would stand at the level of 13,000-13,200 per dollar on the average in the whole of 2015, he went on predicting.