Bank Indonesia intervenes in FX markets after rupiah slump
The central bank is intervening in the spot, domestic non-deliverable forwards and bond markets to maintain the balance of currency supply and demand
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INDONESIA’S central bank is stepping into the market to support the rupiah, which is in its longest losing streak since 2023.
Bank Indonesia (BI) is intervening in the spot, domestic non-deliverable forwards and bond markets, to maintain the balance of currency supply and demand, said Edi Susianto, executive director for monetary management.
“Market confidence needs to be maintained,” Susianto said, adding that the weakness is largely driven by external sentiments.
Susianto’s comments come with the currency set to decline for a sixth straight day. The rupiah, along with other emerging market currencies, is coming under depreciation pressure as signs of resilience in the US economy bolster the greenback.
“Global market developments have been rather unfavourable for EM (emerging market) currencies, including the rupiah, due to escalating tensions in the Middle East and recent better-than-expected US jobs data,” Susianto said.
The rupiah weakened as much as 1.3 per cent to 15,693 per US dollar on Monday. The currency had rallied more than 8 per cent in the quarter ended September, on expectations that the Federal Reserve will persist with heavy rate cuts after its recent half-percentage-point reduction.
BI was seen supporting the currency in early trading, according to traders who spoke on condition of anonymity as they were not authorised to speak publicly. 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 in September, covering 6.4 months of imports and external debt servicing requirements.
The weakness in the rupiah has lifted expectations BI may keep its policy rate on hold at its meeting on Oct 16 after a surprise rate cut in September. BLOOMBERG
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