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CURRENCY - JAKARTA. The Indonesian rupiah on Tuesday tumbled to its weakest in four years as the market reopened after the Eid al-Fitr holidays, prompting the central bank to intervene in the market to stem its slide.
The rupiah declined as much as 2.27% to 16,200 per U.S. dollar, its weakest level since early April 2020, leading the losses among emerging Asia currencies.
While Indonesian markets were closed for the holidays, the U.S. dollar had gained after strong U.S. economic data and rising inflation led markets to push out expectations for when the Federal Reserve could start cutting interest rates.
Bank Indonesia (BI) Governor Perry Warjiyo told reporters the central bank "is always in the market" to stabilise the currency by intervening in spot and domestic non-deliverable forwards, while also coordinating with the government.
"BI is always in the market. We will ensure the currency is stable," he said after attending a meeting with President Joko Widodo and a number of ministers to discuss the impact of rising geopolitical tension in the Middle East.
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Earlier, Edi Susianto, BI head of monetary department told Reuters that the central bank will also boost the attractiveness of rupiah-denominated assets.
The BI said that pressure on the rupiah is also being exerted by a dent in sentiment towards riskier assets amid rising tension between Iran and Israel.
Indonesia's chief economic minister Airlangga Hartarto, who was attending the same meeting with the president, said the government is monitoring the impact of rising tensions in Middle East on oil prices and logistic costs.
Indonesia is a net importer of oil and a big spender on energy subsidies, including for fuels.
Airlangga said the government will ensure the budget deficit will not exceed the legal ceiling of 3% of gross domestic product.
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DOLLAR PRESSURE TO STAY
Satria Sambijantoro, an analyst with brokerage Bahana Sekuritas, said upside dollar pressure may persist in the event of continued strength in U.S. inflation and jobs data until the U.S. presidential election in November.
He said BI may need to hike its benchmark interest rate by 25 basis points to 6.25% at its next meeting to help stabilise the rupiah.
BI will hold its monthly policy meeting on April 23-24.
Handy Yunianto, a fixed income analyst at Mandiri Sekuritas, who expects the rupiah to hover around the current level, said BI's ample forex reserves will provide the BI with some flexibility in stabilising the currency through market intervention.
Yield of the benchmark 10-year bonds rose to as high as 6.888%, its highest since November 2023.
