(Bloomberg) — Indonesia’s central bank pledged to intervene strongly in markets Friday after the rupiah plunged to its lowest level in almost five years. Stocks are poised to enter a technical bear market.
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“We will boldly enter the market to maintain the balance of foreign-exchange supply and demand so that market confidence is maintained,” Edi Susianto, executive director for monetary management at Bank Indonesia, said in a text message. Authorities also intervened on Thursday.
The rupiah fell 0.7% to 16,578 on Friday, its weakest since April 2020, as US tariffs on Canada and Mexico are set to take effect next week. The Jakarta Composite Index fell 3%, taking its decline from its record high in September to more than 20%.
Asian currencies face multiple headwinds including growing pressure from US President Donald Trump’s trade policies and uncertainty over the Federal Reserve’s easing cycle. In Indonesia, weak economic growth is adding to risks with stocks on track for the fifth straight month of net foreign outflows.
The rupiah “looks likely to continue trading with a more risk-off tone,” said Alan Lau, a strategist at Malayan Banking Bhd in Singapore. “The situation though still looks fluid as it is uncertain if the tariff threats could just represent mere brinkmanship or if it would materialize.”
The rupiah has been under pressure this year after BI cut its benchmark interest rate in January in an unexpected move. The currency has slumped almost 3% this year in the worst performance among major emerging-Asian peers.
Indonesia stocks have also been underperforming, with the Jakarta Composite Index falling by 11% in this year, the worst performer among major Asian indices after Thailand. Global funds have pulled out nearly $1 billion from domestic equities.
“Indonesian stock market has continued to de-rate as lackluster earnings growth has led to a decline in both multiples and return-on-equity,” Christopher Wood, global head of equity strategy at Jefferies LLC, wrote in a note. “The fundamental problem for Indonesia remains weak growth.”
–With assistance from Prima Wirayani, Marcus Wong and Catherine Ngai.
(Updates with Indonesia’s stock market poised for a bear market)
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