Time to worry about a weak rupiah?

The Indonesian rupiah has fallen again over the past week, hitting a fresh 17-year low against the US dollar. The sharp drop in the currency, which is down by a cumulative 33% since the start of 2013, has once again invited comparisons with the Asian financial crisis. While we continue to think such comparisons are misguided, not least because foreign currency debt is now much lower than in the past, policymakers still appear concerned. Foreign exchange reserves are down by 7% since March, which indicates the authorities have been intervening to support the currency. The central bank is unlikely to loosen policy if the rupiah continues to weaken.