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(Bloomberg) — The Indonesian rupiah slid by the most in seven months as rising oil prices weighed on sentiment, even as Bank Indonesia signaled it had stepped up efforts to steady the the market.
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The currency dropped 0.7% to 17,295 per dollar on Thursday, its biggest one-day decline since September. It has fallen almost 2% in April to underperform emerging Asian peers, while stocks slid and 10-year bond yields rose eight basis points to nearly 6.70%.
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Indonesia’s assets have come under pressure this month as elevated oil prices squeeze the country’s external and fiscal health. Rising energy costs are also pushing up the bill for fuel and cooking-gas subsidies, rekindling budget concerns that started when President Prabowo Subianto took office and outlined billions of dollars in new spending.
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Against that backdrop, policymakers moved to reassure markets on Thursday when Bank Indonesia said it would continue to increase the intensity of its interventions to maintain rupiah stability, reinforcing Governor Perry Warjiyo’s comments a day earlier.
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Warjiyo had warned that escalating Middle East tensions are worsening the global outlook and narrowing the scope for monetary easing. The resulting flight to safety is steering capital into haven assets, while higher US Treasury yields are pressuring emerging-market currencies, including the rupiah.
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“Increasing concern regarding Indonesia’s fiscal condition” is putting pressure on the rupiah, said Wee Khoon Chong, a senior APAC market strategist at BNY in Hong Kong. There are also questions about “the effectiveness of Bank Indonesia’s intervention strategy amidst a strong dollar and heightened uncertainties in the macro environment.”
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Indonesia’s benchmark Jakarta Composite Index was the worst performer in Asia on Thursday, closing down 2.2% as extended declines in PT Barito Renewables Energy and PT Dian Swastatika Sentosa weighed on the market.
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“JCI is a bit soft today mainly due to IDR weakness, which is weighing on sentiment, alongside some technical pressure from index rebalancing,” said Felix Darmawan, an analyst at PT BCA Sekuritas in Jakarta. Index removals of Barito Renewables and Dian Swastatika over concentration risks are adding to that pressure, he added.
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—With assistance from Matthew Burgess and Bernadette Toh.
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(Updates with latest Bank Indonesia comments, benchmark stock index performance in 4th, 7th, 8th paragraphs.)
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English (US)