Indonesia’s rupiah sinks to lowest since Asian financial crisis as US tariff deadline nears

The Indonesian rupiah pared losses after the country’s central bank intervened to prop up the currency from its weakest level since the Asian financial crisis.

The rupiah fell 0.5 per cent to 16,642 against the US dollar earlier on Tuesday, its weakest since June 1998, before narrowing the decline. The currency has slumped more than 3 per cent this year, making it one of the worst performers in emerging markets.

Bank Indonesia (BI) intervened in the spot foreign exchange, domestic non-deliverable forwards and bond markets to stabilise the rupiah, the central bank’s director for monetary management and asset securities Fitra Jusdiman said in a text message on Tuesday. The central bank intervened “boldly and measuredly” to ensure balanced FX supply and demand, and maintain confidence in the domestic market, Jusdiman wrote.

The rupiah’s weakening is mainly due to global uncertainties, including Donald Trump’s tariffs and a potentially more hawkish Federal Reserve, Jusdiman added.

Indonesia, one of the region’s favourite markets just a year ago, has quickly lost its appeal with global investors as concerns grow over the sustainability of the nation’s economic policies.

President Prabowo Subianto has chipped away at long-established guardrails with populist measures that threaten to push the budget deficit closer to its legal limit of 3 per cent of gross domestic product. Parliament also agreed to expand the role of the military, rolling back some of the safeguards that were put in place shortly after the fall of former dictator – and Prabowo’s ex-father-in-law – Suharto in 1998.