The Indonesian rupiah declined to a fresh four-year low as investors unwound the emerging-market (EM) carry trade, prompting a verbal support for the currency from the nation’s central bank.
The rupiah fell as much as 0.5 per cent to 16,293 per dollar on Wednesday (Jun 5), its weakest since April 2020. That brings one of Asia’s highest yielding currencies below the level which triggered an unexpected interest-rate hike by Bank Indonesia in April to stem the rout.
Central bank governor Perry Warjiyo reiterated on Wednesday that the bank will continue efforts to keep the rupiah stable and stem foreign outflows amid market volatility. Seasonal dividends and Hajj pilgrimage outflows, coupled with a narrowing trade surplus, have weighed on the currency. The rupiah is the worst performing emerging-Asian currency this quarter, after the Philippine peso.
“Lingering fears of EM unwind continue to weigh on the rupiah,” said Moh Siong Sim, a FX strategist at Bank of Singapore. “The local flow picture for the international depository receipt (IDR) remains quite challenging in the near term, amid dividend payouts by Indonesian companies that will continue until mid-July.”
The currency will likely stabilise going forward and is expected to strengthen toward the range of 15,300 to 15,700 per dollar next year, Warjiyo said. Traders are awaiting key US data this week, including the non-farm payrolls print, to guide the direction of the rupiah, one of the more sensitive Asian currencies to dollar movements.
“We are staying cautious of the upside risks for USD/IDR pair in case of any greenback rebound,” said Alan Lau, a FX strategist at Malayan Banking in Singapore. “On the other hand, we do recognise the possibility that further consistent softer US data releases can guide the dollar lower and provide relief for the rupiah.” BLOOMBERG
A NEWSLETTER FOR YOU
Asean Business
Business insights centering on South-east Asia’s fast-growing economies.
