Indonesia’s rupiah fell to its lowest against the U.S. dollar since the Asian Financial Crisis struck in the late 1990s on Friday amid a general shunning of emerging market currencies, which was spurred anew by the tanking of Argentina’s peso overnight.
Argentinian President Mauricio Macri has asked the International Monetary Fund to speed up the disbursement of US$50 billion in loans, and the Argentine central bank raised the key interest rate to an eye watering 60% in an effort to halt peso dumping.
The dollar/rupiah got as high as 14,750 in Asian trade, surpassing even levels touched during the taper tantrum, when emerging market assets were sent into a tailspin starting in 2013 after then Federal Reserve chief Ben Bernanke first broached the idea that the U.S. would begin unwinding its quantitative easing program.
The dollar/rupiah set an all-time high of 16,650 in June of 1998, according to data from Trading Economics.
Investors have long been fretting the ability of even major emerging economies to service dollar-denominated debt in an era of rising U.S. interest rates. Turkey’s lira, Russia’s ruble and South Africa’s rand have all been pressured by these worries in the last couple of weeks and now it looks as though the rupiah’s punishment is being stepped up too.
Money is clearly exiting emerging market nations with large current account deficits, and Indonesia certainly qualifies here. Earlier this month, central bank Bank Indonesia said the country’s current account deficit widened to US$8.0 billion, or 3.0 percent of gross domestic product (GDP), the highest level since late 2014.
The Southeast Asian giant is actually in unarguably better credit position than it was when the Asian Financial Crisis hit 20 years ago, but investors have little time for such nuance at present as they scramble for the exits.
The rupiah was already among this year’s worst-performing Asian units with its debts coming into ever sharper focus as U.S. interest rates have risen.