Rupiah Slumps to 7-Week Low in Run-Up to Indonesia Rate Decision

The Indonesian rupiah slumped to a seven-week low as traders positioned for a policy decision due Thursday and concern about rising domestic virus infections damped sentiment.

The rupiah dropped as much as 1% to 14,597 per dollar, the weakest level since May 29. BI is forecast to cut its key rate by 25 basis points to 4.00%, according to 18 of 30 economists in Bloomberg survey, with 11 predicting no change and one foreseeing a 50 basis points reduction.

“If BI does cut policy rate, and external environment remains volatile, it could be a modest dampener for IDR prospects going ahead,” said Yanxi Tan, a foreign exchange strategist at Malayan Banking Bhd. in Singapore.

Indonesias capital city of Jakarta is expected to decide this week whether it will return to a full lockdown amid a rising number of coronavirus cases. It had extended a transition period to exit from a partial lockdown by two weeks on July 1.

“Concerns over Jakarta potentially seeing tighter restrictions again, and possibly also a somewhat lagged adverse reaction to the negative U.S.-China headlines,” weighed on the rupiah, Tan said.