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Rupiah weakens as markets fear banking crisis will spread

Tempo - March 27, 2023

Antara, Jakarta – The rupiah slumped at the Jakarta Interbank Spot Dollar Rate [JISDOR] this morning, March 27, with growing market concerns that the banking crisis still has the potential to spread. The rupiah opened with a 30-points (0.19%) correction to trade for Rp15,183 per US dollar.

"The rupiah exchange rate has the potential to weaken against the US dollar today due to market concerns over the escalation of the banking crisis," money market observer Ariston Tjendra told Antara, Monday.

Additional concerns, Ariston said, came following reports of Deutsche Bank's credit default swaps (CDS) and deposit withdrawals by customers of US small banks. According to Ariston, this could encourage market players to enter safe assets again, weighing the rupiah.

Worries over potential contagion beyond regional banks threatening to spread to their larger peers was sparked by a sell-off of European bank shares. The sell-off was prompted by the rising cost of insuring Deutsche Bank's debt, as seen in its credit default swaps. It came after a state-sponsored buyout of Credit Suisse, which has fed into the narrative of sector-wide stress.

Ariston added that the rupiah's 1.25% gain over the greenback last weekend happened amid market concerns, creating opportunities for a correction.

For today' trade, Ariston projected the rupiah might be pressed further down towards Rp15,200 per US dollar, with the potential to be held at around Rp15,100.

Source: https://en.tempo.co/read/1707490/rupiah-weakens-as-markets-fear-banking-crisis-will-sprea