The Indonesian rupiah continued to set a new record-low in the post Asian Financial Crisis era. Based on the Bloomberg Dollar Index, the rupiah depreciated 0.07 percent to IDR 13,290 per US dollar on Friday (05/06), the weakest level since 1998. A number of factors are responsible for this weak performance. These include higher bond yields, US dollar demand due to dividend repatriation and debt repayment, Indonesia’s high inflation, uncertainty about the Greek debt crisis and looming higher US interest rates.
Although unconfirmed it is rumored that Indonesia’s central bank (Bank Indonesia) sold USD $500 million on Thursday (04/06) to slow the slide of the rupiah. Pressures on the rupiah are particularly caused by domestic US dollar demand rather than foreign investors pulling funds out from Indonesia. Dividend payouts to foreign stakeholders will continue until July and puts pressure on the rupiah.
Most emerging Asian currencies weakened on Friday (05/06) due to a rise in US and European bond yields. Indonesia’s 10-year government bond rose to around 8.5 percent from the level of 8 percent at the start of the month. The US 10-year Treasury bond yield touched an eight month high of 2.425 percent and therefore reduced the attractiveness of higher yields in emerging Asia.
Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) depreciated 0.37 percent to IDR 13,288 per US dollar on Friday (05/06).
Indonesian Rupiah versus US Dollar (JISDOR):| Source: Bank Indonesia
Meanwhile, Greece postponed its debt repayment to the IMF, due on 5 June 2015, until the end of June but did vow to remain committed to stay in the Eurozone. However, the delay in debt repayment leads to heightened speculation that Greece’s financial situation is worse than expected.