Indonesian Rupiah hits historic lows as forex reserves plunge

USD/IDR extends its gains for the fifth successive day, trading around 18,200 after hitting an all-time high of 18,210 during the Asian hours on Monday. The pair appreciates as the Indonesian Rupiah (IDR) faces renewed pressure from growing fiscal anxieties, new commodity export policies, and skepticism surrounding Bank Indonesia’s (BI) operational autonomy. These domestic strains significantly deepened the IDR's slide, forcing the central bank to step in aggressively to stabilize the market.

According to data released by BI on Monday, these heavy interventions caused Indonesia's foreign exchange reserves to drop by $1.3 billion in May, landing at $144.9 billion. This marks the fifth consecutive monthly decline, dragging reserves down to their lowest level in nearly two years, equivalent to 5.6 months of imports, and highlighting the steep cost of defending the Rupiah.

The USD/IDR pair gains ground as the US Dollar (USD) remains firm amid increased safe-haven demand after the Israeli military stated a missile had been launched from Yemen towards Israeli territory, which has been intercepted by its aerial defense systems.

The Guardian reported that air raid sirens sounded in Tel Aviv, following the attack from Yemen. The retaliatory attacks from Yemen, whose military force, the Houthis, is backed by Iran, reflect that conflicts in the Middle East have started again.

The Greenback received support after stronger-than-expected US employment data reinforced expectations that the Federal Reserve (Fed) could raise interest rates later this year. US Nonfarm Payrolls (NFP) increased by 172,000 jobs in May, compared to 179,000 (revised from 115,000) in the previous reading, and the Unemployment Rate held at 4.3% during the same period.