New figures from Nomura Holdings show the Indonesian rupiah to be Asia’s worst performing currency. The rupiah has weakened almost 14% since the start of June, compared with a 10% slide in the Indian rupee.
The rupiah’s fall is a result of Indonesia’s record current-account deficit. The Bank of Indonesia has embarked on an aggressive tightening policy and has also eaten into the country’s foreign-currency reserves in a bid to protect the rupiah.
More interest-rate rises are likely. Bloomberg quotes a Sept. 13 report from Credit Suisse Group, which says: “The need to defend the currency while also improving the current-account deficit leaves the country with one option — to raise interest rates.”
