Rupiah Keeps Weakening After 1998 Low as Spillover Effect Seen

Indonesia’s rupiah plumbed fresh lows, after sliding yesterday to its weakest close since the Asian financial crisis, amid speculation a selloff in emerging-market assets is gaining traction.

The rupiah fell 1.5 percent to 12,896 per dollar as of 9:04 a.m. in Jakarta, according to prices from local banks compiled by Bloomberg. That follows a 1.9 percent plunge yesterday to the lowest close since August 1998. In the offshore market, one-month non-deliverable forwards declined 0.6 percent to 13,160, after sliding 5 percent in the last two trading days.

The Indonesian currency’s drop was dwarfed by a 9.3 percent decline in Russia’s ruble, which prompted the country’s central bank to raise its benchmark interest rate by 6.5 percentage points to 17 percent. Turkey’s lira fell 3.3 percent yesterday and South Africa’s rand lost 1.4 percent. Investors withdrew more than $2.5 billion from U.S. exchange-traded funds that buy emerging-market stocks and bonds last week, the biggest outflow since January.

“This has spilled over into Asian currencies, which has seen the rupiah continuing to weaken,” said Khoon Goh, a senior foreign-exchange strategist at Australia & New Zealand Banking Group Ltd. in Singapore. “We have seen portfolio outflows from Indonesian bonds and equities, with thin liquidity due to the year-end exacerbating the moves.”