Indonesia and India Intervene to Prop Up Weakening Currencies

Indonesia and India intervened on Friday to prop up their currencies, which are being pressured by an energy price spike.

Despite the sales of foreign currencies by the authorities, Indonesia’s rupiah fell 0.5% to the dollar. The Indian rupee gained 0.7% on Friday, snapping two days of losses.

Both currencies have weakened this year as their economies grapple with higher oil prices caused by the US-led war in Iran. The rupiah is down 7% against the dollar this year, the most among emerging-market peers. The rupee has dropped 5.7%.

Bank Indonesia said in a statement on Friday that it remains committed to maintaining the stability of the rupiah “around the world, around the clock” via interventions in the spot currency market, in non-deliverable forwards as well as purchases of government bonds.

The central bank will “maintain a market presence by taking necessary, consistent and measured steps to maintain rupiah stability and support the external resilience of the Indonesian economy,” it said.

The rupiah hit a record-low on Friday, catching up with other markets at the end of a holiday-shortened work week in Indonesia.

The Reserve Bank of India, meanwhile, sold dollars in offshore and onshore markets to support the rupee, traders familiar with the matter said. Over the past days, the RBI has been stepping in to support the rupee, which fell to a record low last week. A spokesperson for the RBI didn’t immediately respond to an email seeking comment.

The central banks in Asia’s two biggest developing economies following China have ramped up currency interventions as the three-month war in the Middle East chokes off a key global supply route for crude oil, hoisting energy costs, which negatively impact their economies and budgets.