MELBOURNE - Bank Indonesia (BI) stepped in to support the rupiah after the currency weakened past 16,000 per US dollar for the first time in four years.

The central bank said it intervened mainly in the spot and domestic non-deliverable forwards markets, adding that the rupiah’s weakness was mainly driven by risk-off sentiment and dollar gains.

The rupiah fell as much as 1.6 per cent to 16,108 per US dollar on April 16, the weakest level since April 2020, as local markets reopened on April 16 after being shut since April 8 for the Eid al-Fitr holiday.

Against the Singapore currency, the rupiah dropped 0.9 per cent to 11,830 per Singdollar as at 11.31am local time. It has weakened by 1.3 per cent against the Singdollar so far in 2024.

The rupiah’s decline adds pressure on BI to maintain stability in the currency amid persistent US dollar strength and foreign capital outflows.

The nation’s foreign currency reserves fell US$3.6 billion (S$4.9 billion) in March as the authorities intervened in the currency and bond markets.

“Rupiah stability is a priority in BI policy consideration,” said Mr Winson Phoon, head of fixed-income research at Maybank in Singapore. “While we don’t think USD/IDR spot of 16,000 is a line in the sand for BI to hike rates, it still has a relatively high sensitivity to the risk of additional hawkish repricing in US rates.”

The yield on five-year Indonesian government bonds climbed eight basis points to 6.67 per cent

The rupiah has been under pressure for most of 2024 amid concern President-elect Prabowo Subianto’s spending plans will burden Indonesia’s budget. At the same time, a hawkish repricing of US Federal Reserve interest rate expectations has bolstered the dollar.

BI unexpectedly raised interest rates last October after an extended bout of currency weakness.

Some market watchers speculate a rate hike may be back on the table at the central bank’s April 24 meeting. BLOOMBERG