The rupiah plunged to a four-year low on Friday as fears over the reduction of the US monetary stimulus and surging demand for the US dollar continued to drag down the local currency.
The rupiah fell 0.9 per cent this week to 11,730 per dollar as of 3:20 p.m. in Jakarta, after touching 11,736 earlier, the weakest level since March 2009, according to prices from local banks compiled by Bloomberg. Thailand's baht slid 0.8 per cent to 31.84 and Malaysia's ringgit dropped 0.4 per cent to 3.2157.
Bank Indonesia's (BI) move to raise its key interest rate by 25 basis points to 7.5 per cent this month to lure foreign inflows apparently had little impact to shore up the currency, which this week touched Rp 11,736 per dollar earlier, the weakest level since March 2009.
BI Governor Agus Martowardojo attributed the depreciation trend of the rupiah to the minutes of the US Federal Open Market Committee's (FOMC) meeting released this week, which revealed that the reduction of its bond-buying stimulus could take place in the "coming months".
"[The minutes of the] FOMC meeting affects all currencies across the globe, so if there's any weakness in the rupiah at present, we see it as something that is still rational," Agus told reporters in his Jakarta office on Friday.
BI, which recently loosened its market intervention and opted to pile up its foreign exchange (forex) reserves instead, reaffirmed its commitment of not steadfastly holding the currency at a certain mark.
"We do not want to target the currency at a certain level - the present currency rate has reflected the fundamentals of our economy," Agus said.
Nevertheless, he said that BI would remain vigilant because the rupiah would normally see "heavy" pressure before the turn of the New Year due to the high dollar demand for companies' foreign debt payments and earnings repatriation.