Tue, Oct 08, 2024 page12

• Bank Indonesia intervenes as rupiah continues to fall

  WEAKENING: The rupiah is seeing its longest losing streak due to external factors, like US economy resilience and escalating tensions in the Middle East

  • Bloomberg
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  Indonesia’s central bank is stepping into the market to support the rupiah that is in its longest losing streak since last year.

  Bank Indonesia (BI) is intervening in the spot, domestic non-deliverable forwards and bond markets to maintain currency supply and demand balance, central bank monetary management executive director Edi Susianto said.

  “Market confidence needs to be maintained,” Susianto said, adding that the weakness is largely driven by external sentiments.

  

  An Indonesian employee of PT Ayumasagung money changer displays rupiah in Jakarta on Aug. 7.

  Photo: Bagus Indahono, EPA-EFE

  Susianto’s comments come with the currency set to decline for a sixth straight day. The rupiah along with other emerging market (EM) currencies are coming under depreciation pressure, as signs of resilience in the US economy bolster the US dollar.

  “Global market developments have been rather unfavorable for EM currencies, including the rupiah, due to escalating tensions in the Middle East and recent better-than-expected US jobs data,” Susianto said.

  The currency weakened as much as 1.3 percent to 15,693 rupiah per US dollar yesterday. It had rallied more than 8 percent in the third quarter on expectations that the US Federal Reserve would persist with heavy rate cuts after its recent half percentage point reduction.

  BI was seen supporting the currency in early trading, traders said. 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 last month, covering 6.4 months of imports and external debt servicing requirements.

  The weakness in the rupiah has lifted expectations that BI might keep its policy rate on hold at its meeting on Wednesday next week after a surprise rate cut last month.

  Meanwhile, the New Taiwan dollar ended down NT$0.168, or 0.52 percent, at NT$32.131 against the US dollar in Taipei on Monday, its lowest level since Sept. 10, when it closed at NT$32.173.

  Dealers said the US dollar attracted strong buying soon after the local forex market opened, as investors were encouraged by the US nonfarm payroll report, which showed some 254,000 jobs were created last month, beating an earlier market estimate of 150,000.

  The robust jobs report might prompt the Fed not to make big rate cuts later this year, following its aggressive 50 basis point reduction last month, dealers said. As a result, the US Dollar index, which traces the value of the currencies of Washington's six major trading partners, rose yesterday, they noted.

  According to Taiwan's central bank, the US Dollar index rose 0.61 percent yesterday, sending down regional currencies, with the Japanese yen falling 1.33 percent, the South Korea won 0.64 percent and the Singapore dollar 0.54 percent.

  The weakness of those Asian currencies put pressure on the NT dollar throughout yesterday's session, dealers said.

  Additional reporting by CNA
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