Asia’s worst currency: The rupiah

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IDRIndonesia’s currency, the rupiah, has topped India’s rupee in being the worst-performing currency in Asia since June, Japanese investment house Nomura said.

The currency has weakened 13.9 per cent since the start of June, compared with the 10 per cent drop in India’s rupee. Bank Indonesia has embarked on its most aggressive tightening since 2005, joining Brazil and India in taking steps to support their currencies as the prospect of reduced US monetary stimulus prompts investors to sell emerging-market assets. Indonesia’s foreign-exchange reserves have declined as the central bank defended the rupiah, while bondholders are demanding higher yields to hold its debt.

Indonesia sold $1.5 billion of dollar-denominated Islamic bonds this month at the highest yield since 2009; its reserves are near the lowest level in almost three years; and foreigners have pulled out $2.66 billion from local equities since the start of June. The trade deficit widened to a record in July as an export slump extended to a 16th month, while the expanding middle class increased purchases of manufactured goods and fuel.

The slump in the value of Indonesia’s rupiah has revived bitter memories of the 1997/98 Asian financial crisis, when a currency collapse pushed companies with large US dollar borrowings into bankruptcy, tripping up the banking sector and sending the country spiraling into political and social turmoil.

On September 18, the rupiah stood at 11,415 to the US dollar, the worst exchange rate since April 2009.

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Reading Time: 1 minute

Indonesia’s currency, the rupiah, has topped India’s rupee in being the worst-performing currency in Asia since June, Japanese investment house Nomura said.

Reading Time: 1 minute

IDRIndonesia’s currency, the rupiah, has topped India’s rupee in being the worst-performing currency in Asia since June, Japanese investment house Nomura said.

The currency has weakened 13.9 per cent since the start of June, compared with the 10 per cent drop in India’s rupee. Bank Indonesia has embarked on its most aggressive tightening since 2005, joining Brazil and India in taking steps to support their currencies as the prospect of reduced US monetary stimulus prompts investors to sell emerging-market assets. Indonesia’s foreign-exchange reserves have declined as the central bank defended the rupiah, while bondholders are demanding higher yields to hold its debt.

Indonesia sold $1.5 billion of dollar-denominated Islamic bonds this month at the highest yield since 2009; its reserves are near the lowest level in almost three years; and foreigners have pulled out $2.66 billion from local equities since the start of June. The trade deficit widened to a record in July as an export slump extended to a 16th month, while the expanding middle class increased purchases of manufactured goods and fuel.

The slump in the value of Indonesia’s rupiah has revived bitter memories of the 1997/98 Asian financial crisis, when a currency collapse pushed companies with large US dollar borrowings into bankruptcy, tripping up the banking sector and sending the country spiraling into political and social turmoil.

On September 18, the rupiah stood at 11,415 to the US dollar, the worst exchange rate since April 2009.

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