Indonesia's rupiah fell to a record low against the US dollar on Thursday, June 4, breaching 18,000 per dollar for the first time amid growing economic concerns linked to rising global energy prices. The currency hit 18,028 to the dollar, extending its decline to more than 7 per cent this year, making it Asia's worst-performing currency, according to Bloomberg News. The depreciation comes as the conflict involving the US and Israel against Iran drives up oil prices, hitting Indonesia hard as a net oil importer. Permata Bank chief economist Josua Pardede described the 18,000 level as a "psychological threshold" for investors, attributing the rupiah's fall to strong dollar demand and a shrinking trade surplus. Indonesia's trade surplus dropped sharply to just US$89 million in April from US$3.3 billion the previous month, limiting the supply of dollars in the domestic market. Pardede noted that dollar inflows from trade are declining while outflows for energy imports, raw materials, dividends, foreign debt payments and seasonal factors remain high. Despite Bank Indonesia raising its lending rate by 0.5 basis points to 5.25 per cent last month—the first hike in two years—and conducting market interventions, the measures have failed to reverse the rupiah's slide. The central bank has also tightened dollar purchase rules, requiring documentation for monthly transactions exceeding US$25,000, down from a previous threshold of US$50,000 set in April. Spokesman Ramdan Denny Prakoso said Bank Indonesia continues to use "all available policy instruments" to maintain sufficient foreign exchange liquidity.
The rupiah's fall past 18,000 despite rate hikes and tighter dollar controls shows that Indonesia's policy tools are not matching the scale of external pressures. The plunge exposes how dependent the economy remains on volatile energy markets, even as the government refuses to adjust fuel subsidies. With trade surplus collapsing and dollar demand surging, short-term measures appear ineffective in restoring market confidence.
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