Overview
- The rupiah breached the 18,000-per-US-dollar threshold on Thursday, trading around 18,028–18,047 as Jakarta stocks slumped to multi-year lows.
- A sharp rise in global oil prices has swollen Indonesia’s import bill and cut the trade surplus to about $89 million in April, reducing dollar supply for the market.
- Bank Indonesia has responded with a surprise 50 basis point rate hike, tighter rules for dollar purchases and active FX intervention but reserves have fallen to their weakest level in nearly two years.
- Parliament on Thursday approved an amendment that expands the central bank’s mandate and allows legislative performance evaluations, a move that analysts say could undermine Bank Indonesia’s independence and raise risk premia.
- Investors face further pressure from possible MSCI reclassification, warnings from rating agencies and state commodity controls with markets expecting more rate hikes at Bank Indonesia’s June 18 decision.