Rupiah Rises Past 16,000 Per Dollar for First Time Since May

August 8, 2024

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(Bloomberg) — Indonesia’s rupiah strengthened past the key threshold of 16,000 per dollar following a weakening in the greenback and officials’ earlier moves to sooth investor angst over the incoming government’s fiscal policies.

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The currency rose 0.4% to 15,975 per dollar Thursday, breaching the psychological level for the first time since May 22. The rupiah was among the worst-performing Asian currencies in the past year as concerns of a wider fiscal deficit rattled investors.

The rally comes as President-elect Prabowo Subianto’s team sought to placate worries over the government’s debt and fiscal policies and pledged to maintain spending caps. The prospect of a US rate cut as early as September is also helping sentiment. The currency has strengthened more than 2% this quarter, putting it in the league of top performers in emerging Asia.

A fall below 16,000 per dollar may bolster the chance of a Bank Indonesia rate cut later this year, with the central bank viewing currency stability as a precursor to policy easing. The rupiah’s fundamental level is stronger than 16,000 per dollar, Governor Perry Warjiyo said in June.

The currency could test the level for a bit and may not sustain a break, said Alan Lau, a strategist at Malayan Banking Bhd. in Singapore. “We look to be in a period of heightened volatility amid the uncertainty regarding US election, seasonally weaker months for risk assets and concerns on US recessions.”