Rupiah Pressured by Rising US Yields and Oil Prices

Bank Indonesia's executive director Erwin Gunawan Hutapea said Thursday that rising US Treasury yields and oil prices above $100 per barrel are putting pressure on the rupiah. The currency weakened toward Rp 17,900 against the dollar amid expectations of tighter US monetary policy due to concerns over global inflation and the US fiscal outlook.

The benchmark 10-year US Treasury yield reached its highest level since 2007 at 5.11%, while Brent crude climbed back above $100 per barrel at around $103 on Thursday. Higher oil prices pose a challenge for Indonesia, which relies on crude oil and petroleum-product imports to meet part of its domestic energy demand.

Bank Indonesia said it would continue intervening in financial markets through non-deliverable forwards (NDF), spot transactions, and purchases of government securities to keep the rupiah aligned with economic fundamentals. The central bank's foreign-exchange reserves increased to $146.5 billion at the end of August.