Indonesia’s central bank is stepping into the market to support the rupiah that is in its longest losing streak since last year.
Bank Indonesia (BI) is intervening in the spot, domestic non-deliverable forwards and bond markets to maintain currency supply and demand balance, central bank monetary management executive director Edi Susianto said.
“Market confidence needs to be maintained,” Susianto said, adding that the weakness is largely driven by external sentiments.
Photo: Bagus Indahono, EPA-EFE
Susianto’s comments come with the currency set to decline for a sixth straight day. The rupiah along with other emerging market (EM) currencies are coming under depreciation pressure, as signs of resilience in the US economy bolster the US dollar.
“Global market developments have been rather unfavorable for EM currencies, including the rupiah, due to escalating tensions in the Middle East and recent better-than-expected US jobs data,” Susianto said.
The currency weakened as much as 1.3 percent to 15,693 rupiah per US dollar yesterday. It had rallied more than 8 percent in the third quarter on expectations that the US Federal Reserve would persist with heavy rate cuts after its recent half percentage point reduction.
BI was seen supporting the currency in early trading, traders said. That was the first time in months that the central bank had intervened in the market.
The Indonesian central bank has ample resources to support the rupiah, with its foreign exchange reserves remaining near a record. The stockpile stood at US$149.9 billion last month, covering 6.4 months of imports and external debt servicing requirements.
The weakness in the rupiah has lifted expectations that BI might keep its policy rate on hold at its meeting on Wednesday next week after a surprise rate cut last month.
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