Rupiah Intervention Shows EM’s Strong-Dollar Headache
Emerging markets are in the crosshairs of the greenback’s rally. That’s an early challenge to the ambitious agenda of Indonesia’s leader.
Indonesia has been propping up its currency.
Photographer: Dimas Ardian/BloombergBrazil isn’t the only big emerging market struggling with the dollar’s relentless strength. Indonesia, so often depicted as a rising star and gifted with an abundance of natural resources that the global economy desires, is busy propping up its currency. Officials have described their interventions as particularly bold. They need to be: Few things are as totemic in the vast archipelago as the standing of the rupiah.
It has lost about 6% against the greenback this quarter and recently weakened beyond the psychologically important 16,000 level. Aside from being a big, round number, the slide resonates for a couple of reasons. The collapse of the currency during the Asian financial crisis of the late 1990s ushered in more than a deep recession — it was midwife to sectarian strife and a re-ordering of the state. The new president, Prabowo Subianto, a former top army commander, has just taken office with plans to turbocharge the economy.