JAKARTA (Reuters) – Indonesia’s central bank has intervened in the foreign exchange market to protect the rupiah, its governor said on Friday, vowing to use monetary policy to stabilize the currency after it falls
to a more than four-year low against the dollar.
In afternoon trading, the rupee fell 0.9% to 16,415 per dollar, its weakest since April 2020, before recouping some of those losses.
Bank Indonesia (BI) Governor Perry Warjiyo told reporters that the central bank had intervened in the foreign exchange market and used other measures to stabilize the currency. He did not say when the bank intervened, but hinted that it happened during the day.
Warjiyo said the rupiah is “stable” and that the level of depreciation is less than other emerging market currencies such as the Thai baht and the South Korean won.
“We continue to take measures to stabilize the rupee. We have done a lot, whether through interventions or attracting foreign inflows… and everything has gone well,” he said.
In April, BI unexpectedly raised interest rates in response to the sharp fall in the rupee exchange rate.
The currency’s latest decline does not mean it will rise again at the next policy review on June 19-20, but it reduces the likelihood that BI will turn to monetary easing measures soon, said Josua Pardede, an economist at Bank Permata.
The central bank has raised interest rates by a total of 275 basis points since mid-2022.
BI monetary chief Edy Suzianto said Friday’s fall in the rupiah was due to expectations that the US Federal Reserve will keep interest rates high for longer, as well as concerns about the new government’s fiscal policy.
On Friday, Bloomberg News reported, citing sources, that President-elect Prabowo Subianto plans to increase Indonesia’s debt-to-GDP ratio to 50% of GDP by the end of his term from the current less than 40%.
A spokesman for Prabowo did not respond to Reuters’ requests for comment, but the new president has repeatedly said Indonesia can manage higher public debt ratios to finance its development programs. The comments spooked investors concerned about possible financial missteps.