SINGAPORE, Aug 16: The Indonesian rupiah hit a fresh four-year low on Friday, pressured by dollar demand from local importers, while the Indian rupee set an all-time record low on worries that central bank measures to curb capital outflows would prove insufficient.
In stark contrast to the weakness in the rupiah and the rupee, the Chinese yuan set a record high versus the U.S. dollar, helped by position squaring ahead of the weekend.
The Indonesian rupiah fell to as low as 10,380 to the dollar, according to Thomson Reuters data, the rupiah’s lowest level since June 2009.
Flows from local companies helped drag the rupiah lower, said a Jakarta-based trader.
‘They are buying U.S. Dollars,’ the trader said, adding that there was high demand for the greenback from importers.
Measures announced by Indonesia’s central bank on Thursday to contain loan expansion to battle inflation did little to shore up the rupiah.
Indonesia’s central bank had kept its benchmark interest rate unchanged on Thursday as expected.
The central bank, however, cut the ceiling on the loan-to-deposit ratios of commercial banks to 92 percent from 100 percent, and it plans to increase the secondary minimum reserve requirement for rupiah deposits to 4 percent, from 2.5 percent at present.
Analysts said such measures were unlikely stem a recent decline in the rupiah.
‘Yesterday’s BI decision to hold rates and tighten reserve requirements instead…Put the central bank behind the curve on inflation,’ Dariusz Kowalczyk, senior economist and strategist for Credit Agricole CIB in Hong Kong, said in a research note.
‘We expect the resulting downward pressure on the IDR and bond prices to continue,’ he added.
The rupiah has been under pressure from rising inflation, especially after fuel price hikes in July, and as the country is seen more vulnerable to the Federal Reserve’s expected reduction in monetary stimulus later this year, due to a sizable current account deficit.
The Indonesian currency has also come under pressure this week, after data on Wednesday showed a sharp fall in the country’s foreign exchange reserves.
INDIAN RUPEE
The Indian rupee fell to a record low as central bank measures to tighten capital outflows and curb gold imports were seen as unlikely to prop up the currency and could even spark further selling if they spook foreign investors.
The rupee hit an all-time low of 62.03 to the dollar, breaching its previous record low of 61.80 hit on Aug. 6.
India late on Wednesday restricted how much its citizens and companies can invest abroad to reduce pressure on the rupee, while targeting the current account deficit by banning imports of gold coins and medallions among other measures.
CHINESE YUAN
The Chinese yuan hit a record high of 6.1090 against the U.S. Dollar.
Traders said the current phase of yuan strength was stoked by last week’s surprisingly good Chinese economic data, which caught offguard a broader market that had positioned against the yuan. (AGENCIES)
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