Rupiah to expand losses as banking Indonesia fights volatility

(Bloomberg) – The Indonesian Rupiah will extend this year’s 4% decline as a result of fragile investor confidence, which according to analysts results in further intervention by the central bank to the volatility of the vote. MUFG BANK LTD. Expect the currency to weaken in the coming months to 17,100 per dollar, while Barclays Bank PLC says it is likely to intervene with Bank Indonesia by the first quarter of 2026. The Rupiah closed on Monday at 16.805. The Rupiah is the only major Asian currency that has dropped against the dollar this year as concerns about the controversial fiscal policy of President Prabowo Subianto grow. The slide puts pressure on the central bank as it balances efforts to support the currency, while interest rates are low to support growth. The chief economist of PT Bank Permata, Joshua Pardede and PT Bank Danamon’s Hosianna Evalita Situmorang, both say that Bank Indonesia could defend the currency if it weakened over the past 17,000. It dropped a record low of 16.957 per dollar on April 9. “If the rupiah violates this threshold, the potential for market panic can increase, which can eventually cause greater capital outflow and further pressure on the exchange rate,” Bank Permata said. Overseas investors sold more than $ 1 billion to Indonesian stocks and $ 428 million of the nation’s bonds of the country this month, which was displayed by Bloomberg. The Rupiah slipped for a fifth week for the fifth week last week, the longest range of such losses since October 2023. A weakening of currency can accelerate capital outflow while trying to support the currency risks that shrink the foreign reserves of the central bank. Bank Indonesia currently sits on a record high stock reserves, increased by tax and service income, as well as the withdrawal of government’s foreign loans. “We expect Bi to lean heavily on its reserves” and tools such as domestic non-deliverable forwards to smooth volatility, while still tolerating some currency adjustment, said Karinska Salsabila Priyatno, a analyst at PT Mirae Asset Securitas Indonesia. More stories like these are available on Bloomberg.com © 2025 Bloomberg LP first published: 22 Apr 2025, 01:47 am Ist