Jakarta, Sept 30 (Reuters) – The Indonesian rupiah broke the 18,000 per U.S. dollar barrier on Thursday, touching 18,025 – its lowest level since August – as a combination of rising U.S. Treasury yields, volatile oil prices and domestic market strains intensified pressure on the currency.
Market reaction and stock slump
Equity markets reacted sharply. The Jakarta Composite Index fell more than 1.5% after a new rule limiting short‑selling on certain stocks went into effect, amplifying the sell‑off triggered by the currency slide. Traders Union reported that the rupiah’s breach added to “broad‑based nervousness” in the market, prompting foreign investors to trim exposure.
According to Malaya Business Insight, the combination of the currency depreciation and the new trading rule led to a “significant slump in Indonesian stocks,” with several sectors – notably mining and consumer goods – posting double‑digit losses.
Central bank response
Bank Indonesia (BI) confirmed that it had intervened in the foreign‑exchange market to curb further downside, using its foreign‑exchange reserves to provide liquidity. While the interventions helped stabilise the USD/IDR pair in the afternoon session, BI officials acknowledged “fundamental problems” that could limit the effectiveness of short‑term measures.
In an interview cited by IDNFinancials, BI Governor Perry Warjiyo said the central bank was “monitoring the situation closely and will act as needed,” but warned that persistent external pressures could test Indonesia’s macro‑economic resilience.
Underlying drivers
Analysts across the cited outlets pointed to a convergence of external and internal factors. Reuters and KLSE Screener highlighted the rise in U.S. Treasury yields, which has made dollar‑denominated assets more attractive and prompted capital outflows from emerging markets. At the same time, oil prices – a key export for Indonesia – have been erratic, with recent spikes adding to the rupiah’s depreciation pressure.
Kompas.com offered a deeper look at domestic contributors, noting that higher import costs and a widening current‑account deficit have compounded the currency’s weakness. The outlet also mentioned that the “new trading rule” limiting speculative short positions may have inadvertently reduced market liquidity, further amplifying price swings.
The rupiah fell to 18,025 per dollar, its weakest level since August, as higher U.S. yields and volatile oil prices hit emerging‑market currencies.
Economists quoted by Traders Union cautioned that while BI’s interventions can provide temporary relief, the underlying macro‑fundamental imbalances – such as a reliance on commodity exports and a relatively narrow domestic savings base – require structural reforms.
Finance Minister Sri Mulyani Indrawati, speaking at a recent cabinet meeting, reiterated the government’s commitment to “strengthen fiscal buffers and diversify export markets” to mitigate future currency shocks.
Looking ahead, market participants expect the rupiah to remain vulnerable as long as U.S. monetary policy stays tight and oil price volatility persists. Some analysts, referenced by Reuters, predict that the currency could test the 19,000 level if the trend in global yields continues unchecked, while others see the central bank’s reserve‑backed interventions as a ceiling that may prevent a deeper slide.
For now, Indonesia’s policymakers face a delicate balancing act: supporting the rupiah without stifling economic growth, while addressing the “fundamental problems” that BI has openly acknowledged.
