BENGALURU: Asian currencies were subdued on Friday pressured by a firm dollar, with the Indonesian rupiah hitting a four-year low even as the local central bank intervened in the foreign exchange market to maintain investor confidence.
The rupiah fell as much as 0.7% to hit 16,375.00, its lowest level since early April 2020. For the week, it was down more than 1% and has lost 6% year-to-date, making it the second-worst performing currency in the region after the Thai baht.
The rupiah weakness comes a week ahead of the Bank Indonesia’s (BI) monetary policy meeting where it is widely expected to keep interest rates unchanged. But with the rupiah under pressure, analysts have not ruled out a rate hike.
“Our base case is for Bank Indonesia to stay on hold, but the risk of a 25 basis point rate hike is relatively high, in our view, especially if the currency comes under renewed pressure,” Barclays analysts wrote in a client note.
Indonesia’s central bank said on Friday it had intervened in the foreign exchange market to maintain confidence and ensure supply and demand of the rupiah, and that monetary policy would be consistent to ensure inflation was under control and the currency was stable.
Elsewhere in Asia, the Bank of Japan announced that it will start reducing its massive bond purchases in the future, shattering some expectations that it would start the process sooner.
Japanese shares surged on Friday, outperforming weaker Asian markets, while the yen fell sharply.
The dollar index was steady at 105.33 at 0515 GMT and was up 0.6% for the week so far.
Asian currencies have been pressured by the BOJ not sending as clear a signal about reducing bond purchases as the market expected, said Poon Panichpibool, a markets strategist with Krung Thai Bank.
“It has kind of disappointed the market in the way that added to further weakness in the Japanese yen and drove the US dollar higher,” Panichpibool added.
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