(Bloomberg) -- Bank Indonesia stepped in to support the rupiah after the currency weakened past 16,000 per dollar for the first time in four years.

The central bank said it intervened mainly in the spot and domestic non-deliverable forwards markets, adding that the rupiah’s weakness was mainly driven by risk-off sentiment and dollar gains.

The rupiah fell as much as 2.1% to 16,190 per dollar, the weakest level since April 2020, as local markets reopened Tuesday after being shut since April 8 for the Eid al-Fitr holiday.

The rupiah’s decline adds more pressure on Bank Indonesia as it seeks to maintain stability in the currency amid persistent dollar strength and foreign capital outflows. The nation’s foreign-currency reserves fell $3.6 billion last month as the authorities intervened in the currency and bond markets. 

“Rupiah stability is a priority in BI policy consideration,” said Winson Phoon, head of fixed-income research at Malayan Banking Bhd. in Singapore. “While we don’t think USD/IDR spot of 16,000 is a line in the sand for BI to hike rates, it still has a relatively high sensitivity to the risk of additional hawkish repricing in US rates.”

The risk-off sentiment in global markets over the past week also flowed into other assets, with Indonesia’s benchmark stock index dropping as much as 3%. The yield on benchmark 10-year government bonds jumped 17 basis points to 6.82%, tracking moves in US Treasuries. 

The rupiah has been under pressure for most of this year amid concern President-elect Prabowo Subianto’s spending plans will burden the Southeast Asian country’s budget. At the same time, a hawkish repricing of Federal Reserve interest-rate expectations has bolstered the dollar. 

Bank Indonesia unexpectedly raised interest rates last October after an extended bout of currency weakness. Some market watchers speculate a rate hike may be back on the table at the central bank’s April 24 meeting. 

“We think BI can tolerate USD/IDR spot slightly higher than 16,000” but a quick surge toward the 16,500 area raises the odds of a rate hike, Maybank’s Phoon said.

--With assistance from Grace Sihombing.

(Updates rupiah move in third paragraph, prices in sixth, adds comment in last.)

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