BENGALURU: The Indonesian rupiah tumbled to a four-year low on Tuesday after a weeklong holiday as persistent strength in the greenback after a hawkish repricing of rate cut expectations by the US Federal Reserve continued to pressure Asian currencies.
The rupiah depreciated by 2.27% to 16,200.00 per US dollar, its lowest level since early April 2020, prompting the country’s central bank to intervene in the domestic forex market. Equities in Jakarta dipped as much as 3%, marking their biggest percentage loss since early July 2022.
Indonesian markets reopened after the Eid al-Fitr festival, which marks the end of Ramadan.
The country’s most recent inflation data showed the annual inflation rate accelerated more than expected in March to 3.05%, the quickest since August 2023, taking the shine off the rupiah as it indicates weaker purchasing power.
The currency has already lost nearly 5% in value this year and is among the worst performers in the region after political turmoil during the presidential elections raised questions about the country’s fiscal outlook.
“While BI (Bank Indonesia) has waded into the market, the move is prudently aimed at jawboning USD-IDR lower and smoothing volatility instead of capping FX weakness,” Nicholas Chia, Asia macro strategist at Standard Chartered told Reuters.
The US dollar hit a five-month high against major peer currencies after a hotter-than-expected US retail sales data for March, with the dollar index touching 106.37, the highest since Nov. 2.
The dollar, which gained nearly 2% last week, has renewed its strength after data last week showed US consumer prices increased more than expected in March, forcing most Southeast Asian currencies to trade on the back foot.
The Fed’s shift to hawkish rhetoric in March meeting minutes led investors to price in a rate cut in September rather than in June.
In Southeast Asia, the Indian rupee dropped to a record low at the open and largely traded flat by 0406 GMT. The Malaysian ringgit and the Philippine peso followed suit to give up over 0.2% each.
Equities across the region were in a sea of red, with stocks in Singapore and Manila falling over 1% each, while those in Seoul and Taipei slid over 2%, each.
In Vietnam, the dong depreciated as much as 0.38% to 25,275 per dollar, hitting its lowest level on record for a second session in a row amid political uncertainty and leadership changes that shook the Southeast Asian nation.
In China, Southeast Asia’s largest trading partner, data showed economy grew faster than expected in the first quarter offering some relief to officials as they try to shore up growth in the face of protracted weakness in the property sector and mounting local government debt.