LONDON (Reuters) -The volatility in foreign currency markets over the last month needs to be monitored and carefully managed, Indonesia's finance minister said on Tuesday.
The gyrations in FX markets were linked to higher-for-longer U.S. interest rates that were sucking capital out of emerging markets like a "vacuum cleaner", said Sri Mulyani Indrawati, speaking at an event at the Asia House think tank in London.
"The foreign exchange movements (volatility) that we have seen in April need to be managed and watched very carefully," she said.
Indonesia's rupiah recently hit its lowest level since the COVID-19-triggered global market selloff of early 2020. Its 5% fall this year is also the worst start to a year since then and prompted the country's central bank to deliver a surprise interest rate hike in April.
"Dollar strengthening in this case is definitely having a more immediate impact," Indrawati added, explaining that it pushes up the cost of Indonesia's fuel subsidies that already reached 500 trillion rupiah ($32 billion) last year.
There was the pressure of higher global interest rates too, although in that respect she highlighted that the difference between what Indonesia pays in terms of interest rates on its bonds and what the U.S. now pays had hit an all-time low.
Fractured geopolitics, climate change and artificial intelligence were the really "big game changers" however.
The former World Bank official was also asked about expectations that she will be replaced as finance minister by new President Prabowo Subianto.
"I can't answer that question as it is down to the president," she said.
(Reporting by Marc Jones, editing by Karin Strohecker and Sharon Singleton)
By Marc Jones
