Indonesia’s central bank vows strong market interventions to stabilise the rupiah amid record lows, citing sufficient reserves.
JAKARTA: Indonesia’s central bank has sufficient foreign exchange reserves to make the strong market interventions required to stabilise the rupiah, Governor Perry Warjiyo said on Thursday.
The central bank will intervene not only in domestic but also offshore markets around the clock, he added.
The rupiah slid to a fresh record low on Tuesday, falling to 17,445 per dollar, as markets reacted to rising tensions linked to the war in Iran.
The drop prompted Bank Indonesia to renew its pledge to defend the currency by intervening consistently and measurably, and it was trading 0.3% stronger on Thursday.
Warjiyo said that rupiah’s depreciation was due to rising tensions in the Middle East, high rates from the U.S. Federal Reserve, and the exit of many global investors from all emerging markets.
Many companies paid off their debts in foreign currencies during April and May, which was another factor contributing to the rupiah’s weakness, he added.
The central bank announced on Tuesday that it would tighten domestic FX rules by lowering the threshold at which dollar purchases would require documentation, cutting it to $25,000 per party per month to curb speculative demand and further shore up the rupiah.
The currency was under pressure even before the Middle East conflict broke out at the end of February, with investors concerned about Indonesia’s fiscal health, the independence of its central bank and transparency issues in its capital markets.
The rupiah has weakened 4% against the U.S. dollar so far this year, making it one of the worst performing currencies in Asia.
