The Indonesian rupiah weakened to around IDR 17,700 per US dollar on Monday, giving back gains from the previous three sessions as traders locked in profits after the currency touched a near ten-week high last week. Sentiment was further pressured by worries that Indonesia’s current account could remain under strain in the near term, amid elevated global oil prices, strong oil import growth, and softer export performance. In the second quarter, the current account deficit widened to a record USD 12.5 billion, underscoring a deterioration in the country’s external balance.
Inflation risks also persisted, with potential El Niño effects posing an upside threat to prices, even as headline inflation in July slowed to a three-month low. Nonetheless, rupiah losses were partially limited by a weaker US dollar, after a sharp rise in US Treasury yields fueled concerns about the sustainability of Washington’s debt burden.
Acting Bank Indonesia Governor Destry Damayanti recently reiterated the central bank’s commitment to maintaining rupiah stability, keeping the policy rate unchanged at 5.75% for a second consecutive month following a cumulative 100 basis points of rate hikes since May.