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Indonesian rupiah weakest since Asian financial crisis

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(Globalpost/GlobalPost)

The Indonesian rupiah Monday sank to its lowest level against the dollar since the Asian financial crisis 16 years ago, as emerging markets were hit by signs of US recovery.

The unit lost two percent to end the day at 12,713.5 to the dollar, its lowest level since August 1998, around the time Southeast Asia's biggest economy was devastated by financial turmoil.

Like other emerging market currencies, the rupiah has been hit by signs of recovery in the American economy that has led to expectations the Federal Reserve will raise interest rates next year.

A strengthening US economy has led investors to pull out of riskier emerging markets -- where they headed for bigger returns when Western countries were in the doldrums -- and direct their money back towards developed markets.

Analysts also said investors had been withdrawing funds from Indonesian government bonds this month and this was starting to affect the rupiah.

"There appears to be another bout of investor risk aversion on the global stage," said Wellian Wiranto, an economist from Singapore-based OCBC Bank.

The Jakarta benchmark stock market lost one percent on Monday.

The financial turmoil of 1998 sparked a political crisis that ended the three-decade rule of dictator Suharto.

Indonesia was hit hard by emerging market jitters last year when the US began winding back its stimulus programme. But a series of measures, including interest rate rises, had helped stabilise the economy.

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