Indonesia: Indonesian rupiah depreciates beyond 10,000 per USD for the first time since 2009
July 17, 2013
On 17 July, the Indonesian rupiah (IDR) traded at 10,035 per USD, which was 1.5% weaker than the level registered on the same day of the previous month. This figure follows on the heels of the 1.3% decline recorded in the month of June. The IDR's value against the greenback is now at its lowest level since September 2009. On a year-to-date basis, the IDR has lost 4.1% versus the USD.
The Indonesian currency has been on a downward trend since mid-2011. Like many other emerging market currencies, the rupiah has been negatively affected by speculation that the U.S. Federal Reserve may soon start tapering its quantitative easing (QE) programme. The weaker currency put substantial pressure on the country's current account balance in 2012, which registered its first deficit since 1997, mainly due to soaring costs of oil imports.
Recent moves by Indonesia's policymakers, however, should support the IDR. At its 11 July monetary policy meeting, the Central Bank raised its BI rate by 50 basis points to 6.50%, which should take some pressure off the rupiah going forward. Bank Indonesia has also tried to prop up the weakening IDR by intervening in the foreign exchange market. Given that Indonesia must reach deep into its pockets to influence the rupiah, it led to a drop in the country's international reserves, which fell to USD 98.1 billion in June, the lowest level observed since February 2011.
FocusEconomics Consensus Forecast panellists expect the rupiah to trade at 9,864 per USD by the end of this year. For 2014, the panel projects the rupiah to trade at 9,683 per USD.