Indonesian rupiah tumbles to lowest since Asian financial crisis
The Indonesian rupiah pared losses after the country’s central bank intervened to prop up the currency from its weakest level since the Asian financial crisis.
The rupiah fell 0.5 per cent to 16,642 against the US dollar earlier on March 25, its weakest since June 1998, before narrowing the decline. The currency has slumped more than 3 per cent this year, making it one of the worst performers in emerging markets.
Bank Indonesia (BI) intervened in the spot foreign exchange, domestic non-deliverable forwards and bond markets to stabilise the rupiah, the central bank’s director for monetary management and asset securities Fitra Jusdiman said on March 25.
It intervened “boldly and measuredly” to ensure balanced forex supply and demand, and maintain confidence in the domestic market, he added. The rupiah’s weakening is mainly due to global uncertainties, including US President Donald Trump’s tariffs and a potentially more hawkish Federal Reserve, he noted.
The rupiah has also slumped against the Singapore currency and is down about 6 per cent to date in 2025. It was trading at 12,398.16 per Singapore dollar at 4.45pm on March 25.
Indonesia, one of the region’s favourite markets just a year ago, has quickly lost its appeal with global investors as concerns grow over the sustainability of the nation’s economic policies.
President Prabowo Subianto has chipped away at long-established guard rails with populist measures that threaten to push the budget deficit closer to its legal limit of 3 per cent of gross domestic product.
Parliament also agreed to expand the role of the military, rolling back some of the safeguards that were put in place shortly after the fall of President Suharto – Mr Prabowo’s former father-in-law – in 1998.
“Fiscal worries will likely weigh on the currency” as well as seasonal dividend payment repatriation by foreign investors, said Bank of Singapore strategist Moh Siong Sim. “Expect Bank Indonesia to continue to curb excessive rupiah volatility ahead of likely April 2 tariff announcement by the US.”
Pressure had been mounting on the rupiah since January after BI surprised markets with a rate cut as it shifted its focus to bolstering growth. Since then, it has been forced to intervene almost daily to stabilise the currency as global market volatility increased amid concern over US trade policy.
The rupiah’s sell-off followed a rout in the nation’s stocks which fell into a bear market in February. Global funds have sold more than US$2 billion (S$2.7 billion) worth of stocks this year amid fiscal concerns, prompting regulators to ease share buyback rules and delay implementation of short-selling.
Pressure on the rupiah is unlikely to ease near term as traders position for next week’s US tariff announcement. Caution has also set in ahead of a long festive holiday from March 28 to April 7.
“Jittery equities market, ongoing concern on deficit trajectory and the holidays ahead might exacerbate near-term rupiah volatility,” said senior Apac market strategist Wee Khoon Chong at BNY. “Investors who are worried on near-term tariff-related pressure might decide to sell now ahead of the holidays.”
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