Indonesia’s central bank pledged to continue its intervention in the currency and bonds market to ease volatility, and said it will boost forex liquidity as the rupiah slumped to a fresh 31-month low.
Bank Indonesia will hold three forex swap auctions to ensure sufficient liquidity in the interbank market, Nanang Hendarsah, executive director for monetary management, said in a text message on Monday. The bank, which usually holds two auctions a week, has been holding additional sales to ensure the market is well supplied, he said.
The rupiah slumped to its weakest level since October 2015 on Monday as rising U.S. Treasury yields and a firmer dollar trigger a selloff across emerging markets. Bank Indonesia’s pledge last week to add to its first interest rate hike since 2014 to restore market stability hasn’t stopped foreign investors from dumping the nation’s currency, bonds and stocks.
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Global funds have dumped a net $2.3 billion of Indonesian sovereign bonds since the end of March, set for the biggest quarterly withdrawal based on data compiled from 2009, and pulled $1.3 billion from the shares markets. The benchmark bond yield surged to its highest in 14 months on Monday, while the benchmark stock index extended its decline to almost 10 percent this year.
The rupiah’s weakness is due to external factors and a stronger dollar index, Hendarsah said. Bank Indonesia is also coordinating with the government to address the slump in the currency, Governor Agus Martowardojo said last week.
The rupiah has declined 4.4 percent against the dollar this year even as the central bank spent more than $7 billion of reserves since the start of February mostly to halt the slump.
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