Indonesia’s c. bank intervenes to support weakening rupiah

Indonesia’s central bank, Bank Indonesia (BI), is taking steps to bolster the rupiah, which is experiencing its longest losing streak since 2023.

The currency has weakened for six consecutive days, facing depreciation pressure alongside other emerging market currencies.

Edi Susianto, Executive Director for Monetary Management at BI, confirmed the bank’s intervention in the spot, domestic non-deliverable forwards, and bond markets to maintain the balance of currency supply and demand.

“Market confidence needs to be maintained,” Susianto said, attributing the recent weakness primarily to external factors.

This intervention comes as the rupiah weakens further, reaching 15,693 per dollar, a 1.3 per cent decline on Monday. Prior to this depreciation, the currency had enjoyed a strong rally exceeding eight per cent in the quarter ending September.

This rally was fuelled by expectations of continued significant rate cuts from the Federal Reserve following their recent half-point reduction.

According to anonymous traders, BI’s intervention in early Monday trading marked the first such action in months. This suggests a proactive approach to stabilising the rupiah.

Indonesia’s central bank boasts ample resources to support the currency. Its foreign exchange reserves remain near a record high, reaching $149.9 billion as of September. This reserve comfortably covers 6.4 months of import and external debt service requirements.

The recent weakness in the rupiah has heightened expectations that BI may hold its policy rate steady at its upcoming October 16th meeting. This would follow their surprise rate cut in September.

Attribution: Bloomberg

Subediting: M. S. Salama