Indonesia's Rupiah Tumbles Amid Higher US Yields and Global Rate Pressure
The Indonesian rupiah has weakened to 17,935 per US dollar and is on track for its worst weekly drop since mid-May. The decline comes despite Bank Indonesia maintaining its benchmark interest rate at 5.75%. The central bank's decision not to raise rates further suggests it is reluctant to lean solely on big hikes or heavy-handed currency defense.
Higher US Treasury yields have become a significant factor in the rupiah's weakness, as they make dollar-denominated assets more attractive to investors. This has put pressure on emerging-market currencies, including the rupiah, which is sensitive to changes in global interest rates.
Lloyd Chan from MUFG noted that the central bank and finance ministry are coordinating next year's funding plans to manage bond supply and liquidity. However, this effort can only smooth the process and not fully offset a jump in US rates.