[JAKARTA] Indonesia’s central bank will act boldly to maintain rupiah stability by intervening in the spot, domestic non-deliverable forwards and bond markets, a deputy governor said on Wednesday (Apr 9) after the rupiah hit a record low against the US dollar.
Bank Indonesia’s (BI) senior deputy governor Destry Damayanti told Reuters that moves in domestic bonds on Wednesday indicated that investors still had confidence in the sovereign bond market.
The rupiah hit an all-time low of 16,970 per US dollar on Wednesday morning, before paring some of its losses, according to LSEG data. Destry said regional currencies were weaker on the day because of the escalating global trade war.
“This was triggered by (US) President (Donald) Trump’s decision to suddenly decide to increase tariffs on Chinese products by 104 per cent,” she said, adding Indonesia’s economy remained resilient.
It was the second day in a row that the rupiah had fallen to new lows. Indonesia’s financial markets felt the whiplash from the US tariff announcement on Tuesday when markets reopened after a long holiday.
Despite low inflation, BI does not have much room to cut interest rates as it wants to stabilise the rupiah, Maybank Indonesia economist Myrdal Gunarto said on Wednesday.
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“BI seems focused on maintaining domestic economic performance through keeping the stability of rupiah from potential money outflows during the recent unfavourable global economic condition,” he said, referring to the trade war started by Trump.
BI will announce the result of its upcoming two-day policy meeting on Apr 23. Last month, BI held its benchmark interest rate at 5.75 per cent to keep inflation within target, maintain rupiah stability and support growth.
Businesses are worried the record-low rupiah will add more pressure to the economy on top of Trump’s 32 per cent tariffs on Indonesian goods, which took effect on Wednesday, Indonesian employers association chairwoman Shinta Kamdani said.
“We hope the government will immediately mobilise all possible intervention efforts to stabilise the exchange rate, thankfully it can strengthen in the near future,” she said.
To ease pressure, businesses have started to hold back on unnecessary purchases, especially imported goods, Shinta said, adding currency hedging is too costly at the moment due to high volatility.
Jakarta has said it will not retaliate against US tariffs on Indonesia goods and will pursue negotiations, which will include higher imports from the US and possible tax cuts on electronic goods and steel.
Indonesia is expected to send a high-level delegation to the US next week to discuss the tariffs. It will be led by chief economic minister Airlangga Hartarto, who will be accompanied by Finance Minister Sri Mulyani Indrawati and Foreign Minister Sugiono. REUTERS
