Jakarta. The rupiah weakened toward the psychologically important Rp18,000-per-dollar level on Friday as a stronger US dollar, rising US Treasury yields, capital outflows, and high oil prices put pressure on Indonesia’s currency.

The rupiah traded at around Rp17,903 per dollar on Friday, down 0.84% from a week earlier, according to Bloomberg data. Over the same period, the US dollar index, or DXY, gained about 0.9%.

Bank Permata chief economist Josua Pardede said external factors were the main source of pressure on the rupiah, particularly the stronger dollar and higher US Treasury yields.

“Pressure on the rupiah has also been amplified by capital outflows and still-high oil prices,” Josua told Beritasatu.com on Friday.

The 10-year US Treasury yield stood at around 5.16%, up about 16 basis points over the past week. Indonesia’s 10-year government bond yield was around 7.10%, leaving a nominal yield gap of about 1.94 percentage points before accounting for currency risk.

Foreign investors recorded net sales of about $110 million in Indonesian bonds on Sept. 22 and $83.2 million in stocks on Sept. 24, adding to pressure on the currency.

Oil prices have also become a source of pressure. Brent crude traded at around $105 a barrel, up more than 70% since the start of the year. Higher oil prices increase Indonesia’s dollar needs for energy imports while potentially adding to inflation and fiscal pressures.

BI Urged to Strengthen Intervention

Josua said Bank Indonesia should strengthen rupiah stabilization measures through foreign-exchange market intervention, liquidity management and hedging instruments.

The central bank kept its benchmark BI Rate at 5.75% at its Sept. 22-23 policy meeting. Josua said the rate could rise by 25 basis points to 6% in the fourth quarter if external pressures intensify.

He also said currency stability could not rely solely on central bank intervention. Indonesia needs to strengthen its structural supply of foreign exchange by optimizing export proceeds, attracting more foreign direct investment, expanding local-currency transactions and reducing its reliance on imported energy.

Some external buffers remain available. Indonesia’s foreign-exchange reserves stood at $146.5 billion at the end of August, while the country continued to record a trade surplus in July. Portfolio investment also recorded a net inflow of about $400 million through Sept. 21.

Finance Minister Change Not Main Factor

Josua said there was insufficient evidence to link the rupiah’s weekly decline directly to the recent change in Indonesia’s finance minister.

“I do not see sufficient grounds to conclude that the rupiah’s weakening this week was mainly caused by the change in finance minister,” he said.

Instead, he pointed to the stronger US dollar, higher Treasury yields, capital outflows, high oil prices and geopolitical uncertainty as factors more consistent with the currency’s recent weakness.

Coordination between Bank Indonesia and the government will therefore remain important both to stabilize financial markets in the short term and strengthen domestic foreign-exchange supplies over the longer term.

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