As the U.S. Federal Reserve kept interest rates on hold following the FOMC decision on Thursday, uncertainty on this decision had thus driven Indonesia’s currency into a 10th week of declines, which is its longest losing streak since 2000.
U.S. Fed Chief Janet Yellen said that most policy makers want to hike interest rates this year, however the decision this month to keep the rate on hold was due to global uncertainty amid volatile global markets which were primarily driven by China.
This week, foreign investors pulled $84 million from Indonesian funds, which brings outflows from Indonesian equities to $991 million so far in the third quarter, according to Bloomberg.
“Indonesia must keep holding its breath, which is a negative for the rupiah,” I Made Adi Saputra, a fixed-income analyst at PT BNI Securities, told Bloomberg. “Bank Indonesia won’t dare to cut rates to support economic growth before the Fed begins raising, so everything will be on pause.”
Indonesia’s currency, the rupiah, fell to the weakest level since July 1998 on Friday, before later rebounding.
Despite the rate hold this month by the Fed, global investors remain cautious as a rate hike appears be on the horizon by the of the year, however a number of economists have pushed back rate hike estimates into early 2016.