JAKARTA - The Indonesian rupiah hit a record low with local markets swept up in a global sell-off fuelled by inflation fears.The rupiah dropped as much as 1.1 per cent to 17,658 per US dollar on May 18, the worst performer in the region.The Indonesian currency also slumped against the Singapore currency, down 1.2 per cent to 13,804 per Singapore dollar. At this rate, the rupiah has weakened about 6 per cent to the Singdollar in 2026.Jakarta’s main stock index fell more than 4 per cent on May 18 as trading resumed after a holiday weekend, and following global index provider MSCI’s removal of more than a dozen companies from its Indonesia indexes last week.The decline in Indonesian assets mirrored the sell-off across many other Asian markets that rely heavily on energy imports, leaving their economies vulnerable to higher oil prices due to the Iran war.“Investors have been concerned over Indonesia’s fiscal position due to the high energy subsidy bill,” said Mr Khoon Goh, head of Asia research at Australia & New Zealand Banking Group. Higher global yields are adding “pressure on the rupiah as domestic yields will need to rise to make it attractive enough for foreign inflows to be maintained,” he said, forecasting an interest-rate hike on May 20.Fitch Ratings and Moody’s Ratings have both cut the country’s credit rating outlook to negative in 2026. Bank Indonesia is under pressure to step up its defence of the rupiah, which has fallen more than 5 per cent against the US dollar in 2026, making it Asia’s second-worst performer after the Indian rupee.The central bank last week pledged to intervene in the foreign-exchange market and optimise all monetary policy instruments to reduce pressures on the rupiah. But some analysts question the effectiveness of those measures at a time when the rupiah is being hit by oil-price shocks and concerns over domestic fiscal policies.On May 17, Indonesian President Prabowo Subianto spoke about the rupiah‘s weakness at two events during a visit to East Java province, both times saying that villagers were not affected by it because they don’t transact in US dollars.“However, many thousands of rupiah the exchange rate to the dollar is, you folks in villages do not use the dollar anyway,” he said. “Believe that our economy is strong, our fundamentals are strong. Whatever people say, Indonesia is strong.”In a separate speech, Mr Prabowo emphasised that South-east Asia’s largest economy has enough food and energy supply, while chastising those who said the rupiah‘s decline signalled a weakening economy.“Many countries are panicking but Indonesia is still okay,” he said. BLOOMBERG, REUTERS