Indonesia central bank intervenes to defend rupiah, open to buying bonds

JAKARTA  – Indonesia’s central bank has intervened in the foreign exchange market to manage the supply and demand of U.S. dollars amid market turbulence that has sent the rupiah to its weakest since January, an official told Reuters on Tuesday.

Edi Susianto, Bank Indonesia’s head of monetary management, also said the rise in bond yields and capital outflows from the country remained “manageable”, but the central bank was open to the possibility of buying bonds to manage yields.

“We remain present at the market to ensure a balance in FX supply and demand so as to build market confidence,” Edi said, using a phrase the bank typically use to describe currency intervention.

The rupiah extended its depreciation on Tuesday, hitting its weakest level since Jan. 6 of 15,610 a dollar, while the benchmark 10-year bond yield rose to as high as 7.050 percent, the highest since March.

These movements were linked to sentiment against risky assets due to hawkish U.S. monetary policy, Edi said, adding that BI would continue to monitor movements in U.S. Treasury yields.

Other Asian emerging markets were also trading at multi-month lows.

BI is due to hold a two-day monetary policy meeting on Oct. 18 to 19.

It raised interest rates by 225 basis points between August 2022 to January this year to fight domestic inflation, but has since stand pat at each of its monthly policy review as inflation has eased back to target.