JAKARTA (REUTERS, BLOOMBERG) - Indonesian chief economics minister Sofyan Djalil said on Thursday the government will work with the central bank to safeguard the rupiah exchange rate in accordance with fundamentals.
He said the current decline in the rupiah against the US dollar was normal and would not have a big impact.
The rupiah fell as much as 0.2 per cent on Thursday to 13,395 per US dollar, its weakest since August 1998.
The Malaysian ringgit also came uder pressure on Thursday.
The ringgit dropped 0.3 per cent to 3.8055 a dollar as at 10:08 a.m. in Kuala Lumpur, the biggest fall in more than two weeks as a decline in commodity prices erodes the outlook for Malaysia's export earnings.
The ringgit, Asia's worst performing currency, has fallen 8.1 per cent this year and reached a 16-year low of 3.8130 in July.
The currency has come under pressure in the past 12 months amid a drop in Brent and palm oil, Malaysia's key exports.
Prospects the US will raise interest rates and concern about the finances of a state investment company have exacerbated losses for the ringgit, rupiah and other emerging market currencies. Oil declined and the dollar strengthened overnight on reports showing an unexpected pick up in U.S. fuel inventories and accelerating new home sales.
Data on Malaysia' foreign-exchange reserves due later Thursday may provide an indication of whether the central bank intervened after the ringgit weakened beyond 3.8 a dollar, the level it was pegged at during the 1997-98 Asian financial crisis before the fixing was abandoned in 2005.
The holdings have declined 9.1 per cent this year to US$105.5 billion as of June 30, according to figures from Bank Negara Malaysia. The data today are for the two weeks to July 15 and Bank of Singapore currency strategist Sim Moh Siong said they will unlikely show a significant drop.
"The perception here is that there has been some smoothing by the authorities, but the sense is that it's confined to smoothing to avoid excessive volatility rather than drawing a line in the sand," said Sim.