JAKARTA (Reuters): The Indonesian rupiah slid to another record low on Monday despite interventions by the central bank, as stocks slumped and global oil prices surged to two-week highs, though President Prabowo Subianto downplayed the impact of depreciation on citizens.
The rupiah dropped as much as 1.2% to a record low of 17,670 a dollar on Monday before slightly paring back the losses later in the day. Even before the Iran war, Indonesia's currency and stocks were under pressure from investor concerns about market transparency, the independence of the central bank and the government's ambitious spending plans.
Jakarta's main stock index fell around 2% as trading resumed after the holiday weekend, responding to the decision by global index provider MSCI last week to remove more than a dozen companies from its Indonesia indexes.
The central bank has "increased the dosage of our currency interventions" on behalf of the rupiah, Governor Perry Warjiyo said in a parliamentary hearing, as he pledged to take further steps as necessary to arrest the currency's fall ahead of Bank Indonesia's monthly policy meeting later this week.
"This is not business as usual. We are going all out," Warjiyo said, adding that despite a decline of around $10 billion in foreign exchange reserves so far this year, the reserve level was "more than adequate" to maintain stability. The rupiah is considered to be relatively stable so far this year, with the annual exchange rate average still likely to fall within the bank's estimate of between 16,200 and 16,800 per dollar, Warjiyo said.
He predicted that the pressure on the rupiah would ease from around July to August, when there will be a seasonal decline in the demand for dollars used to repatriate dividends, repay debts and pay for hajj pilgrimages.
On Saturday, President Prabowo spoke about the rupiah's weakness at two events during a visit to East Java province, and said on both occasions that villagers were not affected by depreciation because they do not make transactions in U.S. dollars.
"However many thousands of rupiah the exchange rate to the dollar is, you folks in villages do not use the dollar anyway," he said at the launch of a government programme to build cooperatives in villages across the country.
"Believe that our economy is strong, our fundamentals are strong. Whatever people say, Indonesia is strong," he added.
In a separate speech, Prabowo emphasised that Southeast Asia's largest economy has enough food and energy supply, while chastising those who said the rupiah's decline signalled a weakening economy.
"Many countries are panicking but Indonesia is still okay," he said.
Indonesia has increased its fuel subsidy budget to shield people from the impact of rising global crude prices.
(Reporting by Gayatri Suroyo; Additional reporting by Fransiska Nangoy; Editing by John Mair) - Reuters
