(Bloomberg) -- Indonesia’s central bank said it was ready to intervene in currency markets to steady the rupiah as it weakened toward the psychological level of 16,000 per dollar.
Bank Indonesia will always be in the market to maintain market confidence, Executive Director for Monetary and Asset Securities Management Edi Susianto said in a text message on Wednesday. Dollar demand coming from a state-owned company has been declining, which could ease pressure on the currency, he said.
Bank Indonesia, which intervened last month to support the rupiah, has previously said the currency’s fundamental level is stronger than 16,000 per dollar. Asian policymakers are on guard as the dollar’s resurgence this quarter battered regional currencies, with the rupiah set for a 5% slide in the period.
“Authorities appear to be trying to prevent excessive rupiah volatility given the less benign global environment,” said Alan Lau, a foreign-exchange strategist at Malayan Banking Bhd in Singapore. “Dollar seasonality softness in December may be more limited this year, given investor anxiety on the macro environment and can risk keeping pressure on Asian FX.”
Outflows are also adding pressure to the rupiah, with investors pulling about $1.7 billion from Indonesia’s stock market this quarter.
A weak rupiah is likely to keep BI on hold at its December meeting despite inflation remaining well within the central bank’s target band. Governor Perry Warjiyo last week reiterated focus remains on keeping the rupiah stable.
What Bloomberg Economics says:
Indonesia’s soft inflation “won’t be enough to convince Bank Indonesia to cut rates again in December. Rupiah stability is its priority and the central bank has signaled a pause in its rate-cut cycle.” - Tamara Henderson, economist. Read more here
(Updates with more context, economist comment.)
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