Indonesia’s rupiah fell 0.3% to 17,935 per dollar Friday, down more than 1% so far this week and on track for its worst weekly decline since mid-May. Rising US yields, a stronger dollar and expectations the Fed will keep rates higher for longer weighed on it.
Bank Indonesia left its benchmark rate at 5.75% on Wednesday after raising it by a cumulative 100 basis points in May and June to support the rupiah. It signalled a preference for market-based support. MUFG strategist Lloyd Chan said BI and the finance ministry were coordinating next year’s financing plans to ease pressure on domestic bonds, but this would offer limited protection from a prolonged external shock.
The rupiah has fallen 7% against the dollar this year, the worst performance among currencies of oil-importing emerging Asian economies. Fuel subsidies aimed at shielding consumers from soaring crude prices have intensified concerns about the fiscal health of Indonesia’s $1.4 trillion economy.
