Indonesia's rupiah slides to record low against US dollar

Indonesia’s rupiah fell to an all-time low against the U.S. dollar on Thursday, breaking through the key 18,000-per-dollar level as investors grew increasingly concerned about the country’s economic outlook amid soaring energy costs, News.Az reports, citing AFP.

The currency weakened to 18,028 per dollar despite recent measures by the central bank aimed at supporting the rupiah.

According to Bloomberg News, the rupiah has lost more than 7% of its value this year, making it the worst-performing currency in Asia. The decline has been largely driven by a surge in global oil prices following the conflict involving the United States, Israel and Iran.

Permata Bank Chief Economist Josua Pardede described the 18,000 level as an important psychological threshold for financial markets.

Speaking to AFP, Pardede said the currency’s depreciation was being driven by strong demand for U.S. dollars, fueled by rising oil prices and a shrinking trade surplus.

As a net importer of oil, Indonesia is particularly vulnerable to higher crude prices. Although the government has pledged to keep subsidized fuel prices unchanged, the country continues to face mounting pressure from rising import costs.

Indonesia’s trade surplus narrowed sharply to just $89 million in April, down from $3.3 billion in March, further reducing the supply of dollars available in the domestic market, Pardede noted.

“Dollar supply from goods trade is dwindling, while dollar needs for energy imports, raw materials, dividends, foreign debt payments and seasonality needs remain significant,” he told AFP on Wednesday.

“This is why the increase in the BI (Bank Indonesia) lending rate and intervention is not enough to reverse the rupiah's depreciation.”

Last month, Bank Indonesia raised its benchmark interest rate by 0.5 percentage points to 5.25%, marking the first rate increase in two years. The move was intended to stabilize the currency and contain inflationary pressures.

Bank Indonesia spokesperson Ramdan Denny Prakoso said on Wednesday that the central bank continues to deploy “all available policy instruments” to ensure sufficient foreign exchange liquidity and support market stability.

The central bank has also tightened regulations governing purchases of U.S. dollars. Since May, individuals and businesses seeking to buy more than $25,000 in a single month have been required to provide documentation explaining their need for the currency.

The threshold was previously reduced from $100,000 to $50,000 in April, reflecting authorities’ efforts to curb demand for dollars and ease pressure on the rupiah.

News.Az 

By Nijat Babayev