Excessive exchange rate volatility also can affect the balance sheet of corporations and financial institutions, especially when outstanding liabilities in foreign denomination are not hedged. Furthermore, exchange rate volatility can disrupt international trade activity due to capacity limitations affecting either the exporter or importer when adjusting to changes in the exchange rate.
Additionally, when the Government also has foreign-denominated liabilities, for example in Indonesia, exchange rate volatility can disrupt market valuation for SUN as well as fiscal sustainability. Therefore, from a macroeconomic management point of view, our exchange rate policy in the overall framework of monetary policy requires special attention.