JAKARTA (Reuters) – Indonesia's central bank has intervened in the foreign exchange market to defend the rupiah, the Indonesian central bank governor said on Friday, pledging to use monetary policy to stabilize the currency after it fell.
to its lowest levels in four years against the dollar.
The rupee fell 0.9% to 16,415 to the dollar in afternoon trading, the lowest level since April 2020, before paring some of those losses.
Bank Indonesia (BI) Governor Perry Warjiyo told reporters that the central bank intervened in the foreign exchange market and used other measures to stabilize the currency. He did not reveal when the bank intervened, but hinted that it happened during the day.
Warjiyo said the rupee is “stable” and the rate of depreciation is lower than other emerging market currencies such as the Thai baht and South Korean won.
“We are continuing the rupee stabilization measures. We have done a lot, whether through intervention or attracting foreign flows… and everything has gone well,” he said.
BI in April introduced a surprise rate hike in response to the sharp decline in the rupee exchange rate.
The recent decline in the currency does not mean it will rise again at the next policy review on June 19-20, but it makes Bank Permata less likely to focus on monetary easing moves any time soon, said Josua Pardidi, an economist at Bank Permata.
The central bank has raised interest rates by a total of 275 basis points since mid-2022.
BI's head of monetary management, Eddie Susianto, said the rupee's decline on Friday was linked to expectations that the US Federal Reserve will keep interest rates high for longer, as well as concerns about the next government's fiscal policy.
President-elect Prabowo Subianto plans to increase Indonesia's debt-to-GDP ratio to 50% of GDP by the end of his term, from less than 40% currently, Bloomberg News reported on Friday, citing sources.
Prabowo's spokesman did not respond to a Reuters request for comment, but the new president has repeatedly said Indonesia can manage higher public debt ratios in order to finance its development programmes, comments that have investors concerned about potential financial mismanagement.