JAKARTA (Reuters): Indonesia’s central bank has intervened in the currency market to defend the rupiah, its governor said on Friday, vowing to utilize monetary policy to stabilize the currency after its slide.
to more than four-year lows against the dollar.
In afternoon trade, the rupee fell 0.9% to 16,415 per dollar, its lowest level since April 2020, before paring 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 reveal when the bank intervened, but suggested it occurred during the day.
Warjiyo said the rupee is “stable” and the depreciation rate is lower than other emerging market currencies such as the Thai baht and South Korean won.
“We continue to take steps to stabilize the rupee. We did a lot, whether through interventions, attracting an influx of foreign investors… and everything went well,” he said.
In April, BI made a surprise boost in interest rates in response to the acute decline in the rupee.
The currency’s recent decline does not mean it will rise again during the next monetary policy review on June 19-20, but it has reduced the likelihood that BI will decide to ease monetary policy any time soon, said Josua Pardede, economist at Bank Permata.
Since mid-2022, the central bank has raised interest rates by a total of 275 basis points.
BI’s head of monetary management, Edi Susianto, said Friday’s rupiah decline was linked to expectations that the U.S. Federal Reserve would keep interest rates on hold for longer, as well as concerns about the recent government’s fiscal policy.
On Friday, Bloomberg News reported, citing sources, that President-elect Prabowo Subianto plans to boost Indonesia’s debt-to-GDP ratio to 50% of GDP by the end of his term, from below 40% currently.
Prabowo’s spokesman did not respond to a Reuters request for comment, but the recent president has repeatedly said Indonesia could manage higher public debt ratios to finance its development programs, prompting investor concern about potential fiscal mismanagement.
