The rupiah fell to its weakest in more than 20 years on Tuesday (02/10) and other emerging Asian currencies also slid as the dollar held its overnight gains rooted in the striking of a revised North American trade pact. (Reuters Photo/Thomas White)

Rupiah at Its Weakest Level Since 1998; Economy 'Adjusting Well': Finance Minister

BY :AMBAR WARRICK & AGUS BEO DA COSTA

OCTOBER 02, 2018

The rupiah fell to its weakest in more than 20 years on Tuesday (02/10) and other emerging Asian currencies also slid as the dollar held its overnight gains rooted in the striking of a revised North American trade pact.

Appetite for the dollar was underpinned by US Treasury yields, which rose modestly on Monday.

"The greenback may continue to hold the upper hand in Asia despite the apparent pick up in global risk appetite levels, with crude also continuing to climb," OCBC said in a note.

The Singaporean bank said net portfolio flows showed "moderating inflow momentum" for the South Korean won, Taiwan dollar and Thai baht, while outflow momentum for the currencies of India, Indonesia and the Philippines continued.

The rupiah plunged nearly 0.8 percent to 15,021 to the dollar, breaching the 15,000 level for the first time since 1998 and suffering the biggest decline among regional currencies.

The Thai baht, which strengthened the past three sessions, lost about 0.37 percent against the dollar. The currency is the best performer among peers this year.

The won was about 0.5 percent weaker, while the Taiwan dollar shed 0.16 percent. The Philippine peso lost about 0.18 percent.

The Sri Lankan rupee, which fell nearly 5 percent in September, hovered around a record low after the central bank surprised markets by leaving its key rates unchanged.

Chinese markets are closed until next week, while Indian markets were also shut on Tuesday, for a holiday.

Rupiah

In breaching 15,000, the rupiah reached levels last seen in the Asian financial crisis.

A falling rupiah has prompted government and central bank moves to stabilize the currency, including steady policy tightening as well as attempts to curb imports. A drop in risk appetite, as well as fears over a global trade spat have weighed on the rupiah.

"I think it's more of a sentiment issue," said Taye Shim, head of research at Mirae Asset Sekuritas in Indonesia, citing global uncertainties and factors.

"It's beyond Indonesia's control to manage those kinds of uncertainties, and all they can do is to counter these measures internally."

The rupiah has weakened nearly 10 percent against the dollar this year.

Adjust Well

Finance Minister Sri Mulyani Indrawati said on Tuesday that Southeast Asia's largest economy is adjusting "quite well" to higher US interest rates and the fall of the rupiah, asserting that multiple economic indicators are good.

"I think that the adjustment of our economy towards the level of the US monetary policy normalization and its effect on the rupiah exchange rate has been going well," Sri Mulyani said when asked about the rupiah's nearly 1 percent drop.

She said Indonesia's banking industry remained strong, with banks having high capital adequacy ratios, and economic growth in the third quarter was seen "quite high."

Reuters

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