Indonesia rupiah hits 17-year low on slowing economy

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Indonesia rupiahIndonesia’s rupiah dropped to a 17-year low against the US dollar on June 4, pressured by slowing economic growth and high inflation in Southeast Asia’s largest economy.

The rupiah fell 0.4 per cent to 13,271 against the US dollar, the weakest level since August 1998 when Indonesia was in the depths of a financial crisis that led to the ouster of autocratic leader Suharto.

The central bank said it stood ready to intervene in the foreign exchange and bond markets to ensure stability.

“Bank Indonesia will monitor and will always be in the market to calm fluctuations in the exchange rate and the bond prices,” spokesman Peter Jacobs said, adding that the rupiah had weakened along with other Southeast Asian currencies as the US dollar has firmed.

The rupiah is the worst performer among emerging Asian economies so far this year, having lost more than 6 per cent. The yield on 10-year bonds, which has been rising since last week, was at 8.325 per cent, the highest so far this year.

Over the past few months, the central bank has taken several steps aimed at deepening the Indonesian currency market and stabilising the rupiah, including relaxing rules on foreign exchange transactions and setting hedging rules for Indonesian companies. A ban of dollar usage for all local transactions will take effect on July 1.

But the measures have done little to halt the slide in a currency weighed down by Indonesia’s weakest economic growth since 2009 and the highest inflation since December.

“It’s not a pretty place to be; sandwiched between disappointing growth and exports, a weakening stock market, and heading into a possible US rate hike later this year,” said Philip Wee, senior currency economist at DBS, who believes the rupiah could weaken to around 13,660 by the end of this year.

When the rupiah tumbled in March, the central bank said the currency was moving towards a “new normal” and urged investors “not to panic”.

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Reading Time: 2 minutes

Indonesia’s rupiah dropped to a 17-year low against the US dollar on June 4, pressured by slowing economic growth and high inflation in Southeast Asia’s largest economy.

Reading Time: 2 minutes

Indonesia rupiahIndonesia’s rupiah dropped to a 17-year low against the US dollar on June 4, pressured by slowing economic growth and high inflation in Southeast Asia’s largest economy.

The rupiah fell 0.4 per cent to 13,271 against the US dollar, the weakest level since August 1998 when Indonesia was in the depths of a financial crisis that led to the ouster of autocratic leader Suharto.

The central bank said it stood ready to intervene in the foreign exchange and bond markets to ensure stability.

“Bank Indonesia will monitor and will always be in the market to calm fluctuations in the exchange rate and the bond prices,” spokesman Peter Jacobs said, adding that the rupiah had weakened along with other Southeast Asian currencies as the US dollar has firmed.

The rupiah is the worst performer among emerging Asian economies so far this year, having lost more than 6 per cent. The yield on 10-year bonds, which has been rising since last week, was at 8.325 per cent, the highest so far this year.

Over the past few months, the central bank has taken several steps aimed at deepening the Indonesian currency market and stabilising the rupiah, including relaxing rules on foreign exchange transactions and setting hedging rules for Indonesian companies. A ban of dollar usage for all local transactions will take effect on July 1.

But the measures have done little to halt the slide in a currency weighed down by Indonesia’s weakest economic growth since 2009 and the highest inflation since December.

“It’s not a pretty place to be; sandwiched between disappointing growth and exports, a weakening stock market, and heading into a possible US rate hike later this year,” said Philip Wee, senior currency economist at DBS, who believes the rupiah could weaken to around 13,660 by the end of this year.

When the rupiah tumbled in March, the central bank said the currency was moving towards a “new normal” and urged investors “not to panic”.

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