Rupiah breaches key 16,000 level to hit four-year low against greenback

THE Indonesian rupiah breached the 16,000 level against the US dollar on Thursday (Apr 11), falling to a fresh four-year low against the greenback.

As at 6.59 pm, the rupiah was trading at 16,002, according to Bloomberg data.

This comes as the US dollar strengthened on the back of hotter-than-expected inflation data released on Apr 10.

The US dollar index – which measures its value against a basket of six major currencies – climbed 1.1 per cent to 105.169 at 9pm on Apr 11 from 104.033 on Apr 10, minutes before the data was released.

On Apr 2, the rupiah – briefly Asia’s best-performing currency in 2023 – fell to its then-lowest level since 2020, but still remained within a whisker of the psychologically key 16,000 mark.

The last time the South-east Asian currency plummeted past this level was during the Covid-19 pandemic. On Mar 23, 2020, the rupiah sank to 16,655 against the greenback.

Following persistent weakening in the rupiah, DBS senior economist Radhika Rao said in a report earlier this month that rupiah stability takes precedence as a policy mandate, hence the risk of an off-cycle move is not non-negligible at this juncture.

For the year, however, the house said baseline forecasts point towards a moderation in the dollar index in H2 2024 as more clarity is expected to emerge on US policy direction. This, in turn, could provide a reprieve to Asian currencies.

Barclays’ senior regional analyst Brian Tan also noted in an Apr 2 report that a rate hike is not out of the question for Bank Indonesia (BI), should the US dollar-Indonesia rupiah level remain relatively elevated by its upcoming monthly policy meeting on Apr 24.

In October last year, when the rupiah breached the 15,800 mark, Indonesia’s central bank raised its benchmark BI-Rate by 25 basis points in a surprise move.

Tan emphasised that the US dollar-Indonesia rupiah level “would likely have to remain close to 16,000 all the way to the (monetary policy meeting) for a rate hike to be in serious consideration”, and that Indonesia is still closed for the Lebaran holidays.

“That said, the resurgent strength in the USD in the wake of the US (inflation) data raises the risk that the rupiah does remain under pressure until BI meets,” he told The Business Times.