A STUDY OF THE GENERAL ECONOMIC FACTORS CAUSE THE FLUCTUATIONS OF THE INDONESIA RUPIAH EXCHANGE RATE AGAINST CHINESE YUAN (STUDY PERIOD 2007-2010, USING MONTHLY DATA)

Abstract

This research is aimed to identify the dominant factor(s) that affect the Indonesian Rupiah exchange rate against Chinese Yuan. Since there are many factors would cause the fluctuation of Indonesian Rupiah exchange rate against Chinese Yuan, The researcher tries to find out what are the dominant factor(s) that affect the Indonesian Rupiah exchange rate against Chinese Yuan. The research is conducted in Indonesia using econometric model, and is backed up by international fisher effect and purchasing power parity theory. This study is a quantitative research. The researcher directly finds the secondary data and analyzed the data with multiple regression model based on the statistics. The researcher uses F test and to identify the level of significance between the independent variable and dependent variable. The researcher also uses T test to identify which risk factor has highest significance with the dependent variable, which is the Indonesian Rupiah exchange rate against Chinese Yuan. The research has found that difference of inflation rate is the dominant factor that affects the Indonesian Rupiah exchange rate against Chinese Yuan. The researcher found that all of the independent variables (difference of interest rate, difference of trade balance, difference of inflation rate, difference of IP growth rate, and difference of oil price) have correlation with dependent variable (Indonesian Rupiah exchange rate against Chinese Yuan). In addition, the research found that the difference of inflation rate has a negative relationship with the Indonesian Rupiah exchange rate against Chinese Yuan with the lowest significance 0.000. The researcher recommends that the international investors should pay more attention to inflation of two countries when conducting its business international. Meanwhile, other factors cannot be omitted as well.