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View all search resultsExternal pressure, fiscal risks weigh on rupiah
The rupiah has again breached a psychological threshold against the United States dollar as fading hope for a swift settlement of the Iran war pushes up global energy prices and inflation in Indonesia, triggering fresh capital outflows from Indonesia.
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An officer displays Indonesian rupiah banknotes on Sept. 7 at BNI’s Pasar Baru branch in Jakarta. (Antara/Muhammad Adimaja)
T
he rupiah has again breached a psychological threshold against the United States dollar as fading hope for a swift settlement of the Iran war pushes up global energy prices and inflation in Indonesia, triggering fresh capital outflows from Indonesia.
The rupiah was trading below Rp 18,000 per dollar for much of Tuesday, before bouncing back slightly around the spot market closing time but still trading about 1.6 percent lower than a month earlier.
Bank Indonesia (BI) executive Erwin Gunawan Hutapea wrote in a press statement on Tuesday that the weakening was “affected by continued concerns on global inflationary pressure and fiscal risks”.
He noted that oil prices had climbed beyond $108 per barrel, pushing up expectations of further monetary tightening by the US Federal Reserve (Fed).
An agreement between the US and Iran that could lead to a resumption of normal shipping through the Strait of Hormuz, a vital waterway for getting Middle Eastern oil and gas to much of the world, remains up in the air.
To counter the inflationary pressure stemming from higher energy prices, several central banks have raised interest rates, with the Fed increasing its benchmark rate band by 25 basis points (bps) two weeks ago.
The monetary policy tightening by the US central bank, Erwin said, had pushed the yield of the 10-year US Treasury (UST) up to 5.23 percent, the highest it has been since 2007.
