Indonesia’s rupiah yesterday weakened past 15,000 per US dollar for the first time in 20 years amid a souring of sentiment toward emerging-nation assets and as oil prices jumped.
The currency has tumbled almost 10 percent this year as rising US interest rates have boosted the dollar and as the nation’s current-account deficit has left the economy exposed to the financial turmoil that afflicted Turkey and Argentina.
Crude prices have almost tripled since February 2016, putting pressure on the oil-importing nation.
Photo: AFP
“Given the rise in US interest rates, higher oil prices, which may see a wider trade deficit, and a stronger dollar in recent days, it was proving difficult for Bank Indonesia to hold the line at 15,000,” said Khoon Goh (吳昆), head of research at Australia and New Zealand Banking Group Ltd in Singapore. “If sentiment doesn’t improve, we risk further weakness towards the 15,200 region.”
The rupiah has weakened, even as Bank Indonesia has consistently intervened to limit its decline and raised interest rates five times since May.
The currency dropped to as low as 15,025 per dollar, the weakest since the Asian financial crisis in July 1998.
“Indonesia is now a net importer of oil, so the higher crude prices and weaker rupiah are fanning concern that inflation will quicken,” said Toru Nishihama, emerging-market economist at Dai-ichi Life Research Institute in Tokyo. “With oil prices rising, the Fed normalizing policy and Indonesia having fiscal and current-account deficits, negative speculation is harder to contain.”
Indonesia’s bond have also been under pressure. The benchmark 10-year bond yield yesterday climbed nine basis points to 8.1 percent, having increased from 6.32 percent at the end of last year.
The nation’s key stock index has declined 7 percent this year.
In addition to raising borrowing costs, Bank Indonesia has announced the introduction of domestic non-deliverable forwards, which it says would provide an alternative for companies wanting to hedge dollar exposure and help reduce rupiah volatility.
Indonesia is also close to finalizing incentives for exporters holding billions of dollars in banks to encourage them to convert the funds into rupiah, as the central bank steps up efforts to shield the local currency from a global emerging-market rout.
HORMUZ ISSUE: The US president said he expected crude prices to drop at the end of the war, which he called a ‘minor excursion’ that could continue ‘for a little while’ The United Arab Emirates (UAE) and Kuwait started reducing oil production, as the near-closure of the crucial Strait of Hormuz ripples through energy markets and affects global supply. Abu Dhabi National Oil Co (ADNOC) is “managing offshore production levels to address storage requirements,” the company said in a statement, without giving details. Kuwait Petroleum Corp said it was lowering production at its oil fields and refineries after “Iranian threats against safe passage of ships through the Strait of Hormuz.” The war in the Middle East has all but closed Hormuz, the narrow waterway linking the Persian Gulf to the open seas,
Nanya Technology Corp (南亞科技) yesterday said the DRAM supply crunch could extend through 2028, as the artificial intelligence (AI) boom has led the world’s major memory makers to dramatically reduce production of standard DRAM and allocate a significant portion of their capacity for high-bandwidth memory (HBM) chips. The most severe supply constraints would stretch to the first half of next year due to “very limited” increases in new DRAM capacity worldwide, Nanya Technology president Lee Pei-ing (李培瑛) told a news briefing. The company plans to increase monthly 12-inch wafer capacity to 20,000 in the first half of 2028 after a
Taiwan has enough crude oil reserves for more than 100 days and sufficient natural gas reserves for more than 11 days, both above the regulatory safety requirement, Minister of Economic Affairs Kung Ming-hsin (龔明鑫) said yesterday, adding that the government would prioritize domestic price stability as conflicts in the Middle East continue. Overall, energy supply for this month is secure, and the government is continuing efforts to ensure sufficient supply for next month, Kung told reporters after meeting with representatives from business groups at the ministry in Taipei. The ministry has been holding daily cross-ministry meetings at the Executive Yuan to ensure
RATIONING: The proposal would give the Trump administration ample leverage to negotiate investments in the US as it decides how many chips to give each country US officials are debating a new regulatory framework for exporting artificial intelligence (AI) chips and are considering requiring foreign nations to invest in US AI data centers or security guarantees as a condition for granting exports of 200,000 chips or more, according to a document seen by Reuters. The rules are not yet final and could change. They would be the first attempt to regulate the flow of AI chips to US allies and partners since US President Donald Trump’s administration said it rescinded its predecessor’s so-called AI diffusion rules. Those rules sought to keep a significant amount of AI
RSS