JAKARTA (Reuters) – Indonesia’s central bank has intervened in the currency market to defend the rupiah, its governor said on Friday, vowing to use monetary policy to stabilize the currency after it fell.
to the lowest level in four years against the dollar.
The rupiah fell 0.9% to 16,415 per dollar in afternoon trading, its lowest level since April 2020, before paring some of those losses.
Bank Indonesia (BI) Governor Perry Warjiyo told reporters that the central bank intervened in the foreign exchange market and used other measures to stabilize the currency. He did not reveal when the bank intervened, but hinted that it had taken place during the day.
Warjiyo said the rupiah was “stable” and its depreciation rate was lower than other emerging market currencies such as the Thai baht and the South Korean won.
“We are continuing with measures to stabilize the rupiah. We have done a lot, be it interventions, attracting foreign inflows… and everything has gone well,” he said.
BI implemented a surprise rate hike in April in response to a sharp fall in the rupiah 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 does make it less likely that BI will move to monetary easing anytime soon, said Bank Permata economist Josua Pardede.
The central bank has raised interest rates by a total of 275 basis points since mid-2022.
BI’s head of monetary management, Edi Susianto, said Friday’s decline in the rupiah was linked to expectations that the US Federal Reserve would keep interest rates high for longer, and concerns about the new government’s fiscal policy.
Bloomberg News reported Friday, citing sources, that newly elected President Prabowo Subianto plans to raise Indonesia’s debt-to-GDP ratio to 50% of GDP by the end of his term, from less than 40% currently.
Prabowo’s spokesman did not respond to Reuters’ request for comment, but the new president has repeatedly said Indonesia could manage higher government debt to finance its development programs. These comments had made investors fearful of possible budget mismanagement.
