The rupiah failed to gain ground on Monday as concerns about Europe’s debt crisis escalated, blunting the positive impact of intervention by Indonesia’s central bank.
Foreign exchange and debt traders in Jakarta said that some Indonesian companies were seeking dollars to help settle their overseas debt on Monday.
“It’s a combination of various factors, the euro concerns and the need for local companies to buy dollars,” said one trader at Jakarta bank, who declined to be identified. Such concerns have heightened pressure on the rupiah.
The dealer said Bank Indonesia had been in the market to help prop up the value of the rupiah against the American greenback.
The rupiah was trading at 9,510 at one point in Jakarta on Monday, before it eventually closed at 9,480. That meant the rupiah had weakened almost 0.5 percent in the last week.
The rupiah, which lost almost 70 percent of its value during the Asian financial crisis more than a decade ago, has weakened 4.5 percent this year. The rupiah was trading at 9,068 against the dollar at the of last year, according to data from the central bank.
Bank Indonesia, which started selling dollar-denominated term deposits two weeks ago, sold similar facilities last week. The central bank is planning to sell such facilities this week, offering dollars to Indonesian lenders.
Central bank representatives refused requests for comment.
The sale of the dollar-denominated term deposit is meant to help strengthen the value of the rupiah against the dollar. Indonesian banks, which have parked some of their dollar funds with overseas lenders, have been encouraged to buy the facilities offered by the central bank. That way, the pressure that has hit the rupiah in recent weeks will be reduced, which in turn will help the rupiah gain ground.
The currency has weakened 4.5 percent this year, the second-worst performance among Asia’s most-traded currencies, after India’s rupee, according to data from Bloomberg.
Similarly, Indonesia’s bond market has not recovered. The yield of the government bonds maturing in 10 years rose to 6.2575 percent on Monday from 6.1755 on Friday, according to data from Indonesia Bond Pricing Agency. Bond yields move inversely to bond prices.
However, the holdings by foreign investors of Indonesia bonds rose. Foreign holdings of Indonesian bonds rose to Rp 226.01 trillion ($24 billion) on Friday from Rp 224.1 trillion in early June, according to data from the Finance Ministry’s debt management office.