Effects of the Money Market and the Need for Knowledge of Interest Rates and the Foreign Exchange Market for Benefit: Evidence In Indonesia

Abstrak

This paper describes the increasing interest in investment during this pandemic, especially in money market instruments and the foreign exchange market. It was found that, due to the lack of knowledge and literacy regarding what factors can affect the money market and forex market in Indonesia, quite a lot of people lose money when investing in foreign currencies or in the form of existing money market instruments. The desired impact is beneficial for the long-term economy. It was concluded that the people who suffered losses generally did not understand the relationship between the money market, interest rates, and the foreign exchange market. Placement of funds in the money market is always related to the forex market. If someone wants to invest their money in money market instruments, ideally considering the activities that occur in the forex market, this is nothing but to protect assets as in Islamic guidance in maqashid sharia. However, the interaction between the money market and the foreign exchange market becomes important when the amount of funds is large or the economic conditions are not good. In the end, financial literacy for the community is still very much needed, so that there is no speculation and bandwagon. Fundamental economic forces such as inflation rates and interest rates are two factors that affect currency prices that affect both markets. With a qualitative approach, data sources were collected from related journals, and online news, analyzed, and described in this paper.