Sliding Rupiah Approaches New Threshold as Analysts Stay Bearish

(Bloomberg) -- Brace yourselves: there may be more pain to come for Indonesia’s rupiah.

Analysts say the currency of Southeast Asia’s biggest economy is set to breach the level of 15,000 per dollar for the first time since the depths of the Asian financial crisis in 1998. The rupiah slid as low as 14,782 Monday as the nation’s trade deficit and reliance on oil imports render it vulnerable to the emerging-market selloff triggered by financial turmoil in Turkey and Argentina.

“Fifteen thousand is the next psychological level the rupiah may breach,” said Nick Twidale, chief operating officer at Rakuten Securities in Sydney. “Investors will be watching the central bank closely to see their next move, with rate hikes only really providing road humps in the rupiah depreciation so far.”

Sliding Rupiah Approaches New Threshold as Analysts Stay Bearish

The rupiah has tumbled more than 6 percent in the past three months even as the central bank has intervened in the currency and bond markets to help plug the selloff. Bank Indonesia has also raised interest rates four times since May as it seeks to stem the rout.

Indonesia’s trade deficit and reliance on oil imports are just “pummeling the rupiah,” said Stephen Innes, head of trading for Asia Pacific at Oanda Corp. in Singapore.

Not everyone is downbeat. RHB Banking Group predicts the currency will bounce back to around 14,500 by year-end as the central bank successfully halts the selloff.

Certain measures to address rupiah weakness, such as reducing the current account and fiscal deficits, will somewhat help to reduce the pressure on rupiah, Ahmad Nazmi Idrus, an economist at RHB in Kuala Lumpur, wrote in a research note.

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