Indonesia rupiah drops to record low on strong dollar, MSCI woes
The rupiah is down more than 8% against the dollar this year, the worst performer in Asia
The Indonesian rupiah has plummeted to an all-time low of 18,204 per dollar on Thursday, November 12, as the country's currency faces a record decline of more than 8% against the dollar this year. The rupiah's weakness is attributed to a stronger dollar and concerns over MSCI potentially removing Indonesia's stocks from its emerging-market indexes.
The Jakarta Composite Index of shares rose by 0.8%, while the 10-year bond yield remained steady at 7.62%. The currency's decline has been further exacerbated by investor sentiment being fragile following MSCI's proposal to reclassify Indonesia as a standalone market in October, citing persisting investability concerns. Goldman Sachs estimates about US$5.6 billion in passive outflows if this happens, effectively removing Indonesia's stocks from MSCI's indexes.
The rupiah has been negatively impacted by policy uncertainty, a potential sovereign rating downgrade, high oil prices driving up government subsidy costs, and putting pressure on public finances. Bank Indonesia remains vigilant about market developments and is monitoring capital outflows following the MSCI announcement.
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