Rupiah Hits Lowest Level Since 1998 Financial Crisis

On Tuesday, September 4, 2018, the Indonesian Rupiah weakened to 14,845 per US dollar before recovering to 14,780 per US dollar. According to Bloomberg data, this was the Rupiah's worst level since the 1998 financial crisis. Year-to-date (Ytd), the Rupiah has weakened by 8.6% against its position at the end of 2017.

Concerns over the US-China trade war, expected to expand to other countries, fueled uncertainty in global financial markets. Improved US economic growth data (4.2%) and inflation reaching 2.9% strengthened speculation that the Federal Reserve (The Fed) would soon raise interest rates at its meeting this month, contributing to the Rupiah's weakening.

Global uncertainty caused stock and bond prices in emerging markets like Indonesia to fluctuate. This led fund managers to temporarily invest in US dollar-denominated assets and divest from assets considered risky in emerging markets, causing the Rupiah to depreciate significantly. Furthermore, the crisis in Argentina also contributed to the Rupiah's weakening, pushing it closer to the psychological level of Rp 15,000 per US dollar.