Indonesia CRISIS: Rupiah SLUMPS to its weakest level in more than 20 YEARS
INDONESIA’S rupiah has plummeted to its lowest level in more than two decades, forcing the country’s central bank to step in.
By PAUL WITHERS
Express.co.uk
Mon, Sep 3, 2018
On Monday, the country’s currency fell 0.7 percent to 14.777 rupiahs to the dollar, it’s weakest level since the Asian financial crisis in 1997-98.
Despite weekend interventions from the central bank, it is still one of the worst-affected currencies in the emerging markets sell-off.
It has already fallen nine percent against the dollar so far this year.
The emerging markets panic has been triggered by the crisis-hit Turkish lira, which has plummeted 40 percent against the dollar so far this year alone as a diplomatic feud with the US continues.
According to a report from Reuters, Bank Indonesia said it will be intervening in the foreign exchange and bond markets.
Data from ratings agency Moody’s revealed Indonesia, the largest economy in Southeast Asia, has around 41 percent of government debt denominated in foreign exchanges and a further fall in the rupiah would make those more expensive to pay.
Vishnu Varathan, head of economics and strategy at Japanese financial services firm Mizuho Bank, told CNBC in an email: “The high foreign-ownership on bonds coupled with Indonesian corporates’ increased US dollar debt are also rendering the Indonesian rupiah prone to more weakness.
“If credit spreads rise further on emerging market risks and oil remains elevated ahead of Iran sanctions set to bite in November, the risks of breaching 15,000 is a clear and present danger.”
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