Indonesia and India intervene to prop up weakening currencies
The economies of both countries are grappling with higher oil prices caused by the US-led war against Iran
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[JAKARTA] Indonesia and India intervened on Friday (May 29) to prop up their currencies, which are being pressured by an energy price spike.
Despite the sales of foreign currencies by the authorities, Indonesia’s rupiah fell 0.5 per cent to the US dollar. The Indian rupee gained 0.7 per cent on Friday, snapping two days of losses.
Both currencies have weakened this year, as their economies grapple with higher oil prices caused by the US-led war against Iran.
The rupiah is down 7 per cent against the US dollar this year, the most among emerging-market peers. The rupee has dropped 5.7 per cent.
Bank Indonesia said on Friday that it remains committed to maintaining the stability of the rupiah “around the world, around the clock”.
It will do so via interventions in the spot currency market, non-deliverable forwards as well as purchases of government bonds.
The central bank will “maintain a market presence by taking necessary, consistent and measured steps to maintain rupiah stability and support the external resilience of the Indonesian economy”, it added.
The rupiah hit a record low on Friday, catching up with other markets at the end of a holiday-shortened work week in Indonesia.
The Reserve Bank of India (RBI), meanwhile, sold US dollars in offshore and onshore markets to support the rupee, traders familiar with the matter said.
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Over the past days, the Indian central bank has been stepping in to support the rupee, which fell to a record low last week.
A spokesperson for the RBI did not immediately respond to queries.
The central banks in Asia’s two biggest developing economies following China have ramped up currency interventions.
This is as the three-month war in the Middle East chokes off a key global supply route for crude oil, hoisting energy costs, which negatively impacts their economies and budgets. BLOOMBERG
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