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Indonesia's central bank intervenes to defend faltering rupiah

Tan KW
Publish date: Fri, 14 Jun 2024, 06:13 PM
Tan KW
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JAKARTA Indonesia's central bank intervened in the foreign exchange market to defend the rupiah, its governor said on Friday, vowing to use monetary policy to stabilise the currency after it fell to over four-year lows against the dollar.

The rupiah skidded 0.9% to 16,415 per dollar in afternoon trade, the lowest level since April 2020, before paring some of those losses.

Bank Indonesia (BI) Governor Perry Warjiyo told reporters the central bank intervened in the foreign exchange market and used other measures to stabilise the currency. He didn't disclose when the bank intervened, but hinted that it had occurred during the day.

Warjiyo said the rupiah was "stable" and that the depreciation rate was less than other emerging market currencies such as the Thai baht and South Korean won.

"We continue the measures to stabilise rupiah. We have done a lot, whether through intervention, attracting foreign inflows...and everything have gone well," he said.

BI in April delivered a surprise interest rate hike in response to a sharp drop in the rupiah exchange rate.

The latest decline in the currency does not mean it will hike again at its next policy review on June 19-20, but it made BI less likely to pivot to monetary easing moves anytime soon, said Josua Pardede, Bank Permata economist.

The central bank has raised interest rates by a total of 275 basis points since mid-2022.

BI's head of monetary management Edi Susianto said Friday's rupiah drop was linked to expectations the US Federal Reserve would keep interest rates higher for longer, as well as concerns about the incoming government's fiscal policy.

Bloomberg News reported on Friday, citing sources, that President-elect Prabowo Subianto plans to increase Indonesia's debt-to-GDP ratio to 50% of GDP by the end of his term, from under 40% currently.

Prabowo's spokesperson did not respond to Reuters' request for comment, but the incoming president has repeatedly said Indonesia could manage higher public debt ratios in order to fund its development programmes, comments that had spooked investors worried about potential fiscal mismanagement.

 


  - Reuters

 

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