(Bloomberg) -- Indonesia’s rupiah looks poised to weaken through the closely watched 16,000-per-dollar level when markets reopen on Tuesday, putting pressure on the central bank to step up intervention. 

The local currency is likely to track a slump in the offshore non-deliverable forwards, with the one-month contract weakening 1.2% since April 5 to 16,101. Local markets have been closed since last Monday for the Eid al-Fitr holiday. Indonesian stocks are also expected to decline amid a rise in risk-off sentiment. 

Much has happened overseas while Indonesia was shut, increasing the risk of outsize moves when traders return. Strong economic readings from the US have reduced bets on the pace of the Federal Reserve’s interest-rate cuts, weakening appetite toward emerging-market assets. Geopolitical tensions have also ratcheted up in the Middle East.

Authorities are “likely to smooth market moves if USD/IDR breaks above the psychological 16,000 level,” said Wei Liang Chang, a macro strategist at DBS Bank Ltd. in Singapore. The drop in the rupiah should be “more of a catch down to regional currency weakness against the US dollar rather than any local drivers,” he added.

Bank Indonesia has been facing pressure to support the rupiah amid persistent dollar strength and foreign capital outflows. The central bank delivered a shock rate hike last October after an extended bout of currency weakness. Some market watchers speculate that a rate hike may be back on the table at the central bank’s upcoming meeting on April 24. 

“If dollar-rupiah is through 16,000 by the time of the BI meeting, I would expect a response from BI beyond intervention,” said Alvin Tan, head of Asian currency strategy at Royal Bank of Canada in Singapore.

Its efforts to intervene in the spot, domestic non-deliverable forward and bond markets drained $3.6 billion from its foreign reserves last month.

Indonesian equities are also expected to face pressure amid mixed results from the ongoing first-quarter earnings, according to Ariyanto Jahja, head of Indonesia research at Macquarie Group’s securities unit in Jakarta. 

Since reaching a record in March over optimistic growth prospects, the Jakarta Composite Index has fallen 2% through April 5. Singapore-listed Indonesian stock futures have slid 1.6% since markets closed for the holiday.

The declines, however, may be short-lived, said Jahja. Assumptions that headwinds to the elections are over and a better macro trajectory in the second half of the year “should be conducive for the market,” he added.    

--With assistance from Tassia Sipahutar.

(Updates NDF, stock futures move)

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