$Jardine C&C (C07.SG)$ The Indonesian rupiah is the weakest ...
The Indonesian rupiah is the weakest since Mar 2020.
![$Jardine C&C (C07.SG)$ The Indonesian rupiah is the weakest since Mar 2020. Weak rupiah is bad for its earnings. But Indonesian central bank has intervened. Whe...](https://sgsnsimg.moomoo.com/sns_client_feed/102079252/20240715/b20e6f6e134a20093f97e649379934b7.png/big?area=101&is_public=true)
Weak rupiah is bad for its earnings. But Indonesian central bank has intervened. When the new president takes office, there will be more certainty. When the Fed cuts rates, the rupiah will rise. So rupiah may have bottomed.
It weakened to 16,200 per US dollar, prompting intervention by Indonesia's central bank to support the currency.
There are several reasons why the rupiah is weakening, said Mr Andry Satrio Nugroho, an economist at the Institute for Development of Economics and Finance (INDEF).
"The main factor is high inflation in the US, which prompts the (Federal Reserve) to increase its interest rate and there are no signs it will be lowered," he said.
The Fed's interest rate is currently at a 23-year high of about 5.25% to 5.5%.
Another reason why the rupiah is underperforming is the war in the Middle East.
"Both trigger capital outflow from developing countries," said Mr Andry.
Higher Fed interest rates attract investment capital as investors seek higher returns on bonds and interest-rate products, according to financial media website Investopedia.
For the rupiah in particular, concerns about a new government taking office in Oct may also have played a role in its depreciation, noted Mr Mohammad Faisal, executive director of the Centre of Reform on Economics (CORE) Indonesia, a think tank which focuses on research in economy and industry.
"Especially how the fiscal management will be under the new elected government," he said.
Industry Minister Agus Gumiwang Kartasasmita said the rupiah's weakening will impact Indonesia's industrial competitiveness, especially sectors that use raw materials from abroad.
Raw materials for industries such as automotive will feel the impact, said Mr Faisal.
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