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or local market players, the rupiah rate of 10,000 per US dollar is a sacred and crucial psychological threshold, and that'€™s what Bank Indonesia (BI), the central bank, has failed to protect.

The rupiah ultimately hit the five-digit zone this week, a situation that some define as a crisis. It happened mostly because BI apparently underestimated the magnitude of rupiah pressure in June, a period when the demand for dollars is usually at its height due to surging companies'€™ earnings repatriation and foreign debt payments.

In April, the US-based JPMorgan Chase, a major player in foreign exchange (forex) business here, reprimanded BI that foreign investors were beginning to become nervous about the availability of dollars in the upcoming months.

In May, newly-appointed Finance Minister Chatib Basri warned that uncertainty over fuel subsidies could trigger massive capital outflow, which could put pressure on the rupiah.

But BI stood still, keeping its monetary stance unchanged. The fruit of such negligence can be seen today, when both the aforementioned warnings are reality, with the rupiah'€™s sharp downswing already sending jitters to the market and prospective investors.

Under the leadership of Darmin Nasution, the central bank succeeded in coping with escalating pressure on the rupiah in January, when BI was forced to heavily intervene in the market, splashing US$4 billion of its forex reserves to prevent the rupiah from breaching the 10,000 barrier.

There are still weakening threats from offshore speculators using the rupiah as their wager. In January, an investigation in Singapore concluded that the rupiah rates there were actually manipulated by some banks, which colluded before submitting their respective rates, in order to reap short-term profits.

Facing escalating pressure on the rupiah, BI took action by hiking its overnight deposit facility rate (Fasbi) by 25 basis points to 4.25 percent on Tuesday evening. Hiking the rate would support the rupiah as BI could absorb excess liquidity in the market, as a higher Fasbi rate means that lenders now have more incentives to make overnight deposits in the central bank.

But, isn'€™t this a step taken too late? Since the beginning of the year, economists have warned that the spread between Fasbi and the BI rate (now 5.75 percent, unchanged for 15 consecutive months) might be too wide, expecting a swift adjustment to support the under-pressure rupiah.

In fact, if BI had hiked its Fasbi rate one or two weeks earlier, the pressure on the rupiah might be well anchored, hence a strong possibility that the currency might have been still safe at the 9,700-9,800 level.

The weakening rupiah is a threat for future inflationary pressure, as imported goods will soon become more expensive.

Besides, it is worth noting that BI will most likely fail to meet its annual inflation target of 5.5 percent, with the central bank already forecasting that inflation this year could reach as high as 7.8 percent due to the impending fuel price hike.

A weak rupiah is also a deterrent for bonds investors, who might find investing in Indonesia'€™s bonds market no longer attractive as their profits shrink due to currency loss.

Nevertheless, it'€™s not fair to blame BI too much for the current situation. The central bank should not be the one holding the biggest responsibility for the recent mess '€” BI, in fact, has been carrying the too heavy burden of maintaining stability at times, while the government'€™s stupidity has continued to systematically cripple the economy.

The pressure on the rupiah stems from the persistently high current account deficit, which continues to widen because of soaring oil imports. President Susilo Bambang Yudhoyono could solve the situation by hiking fuel prices (he has the authority to adjust the fuel price without the House'€™s approval), yet he remains undecided on the issue.

When our economy faces challenging moments like this, the President has even reshuffled his economic team, replacing Darmin with new Governor Agus Martowardojo in May.

With the rupiah now heading into a vicious depreciation cycle, that decision turned out to be a howler. Looking at Darmin'€™s reputation as an astute economic forecaster, there is strong possibility that he would have been able to manage the situation better than Agus, who is still adjusting to life at BI.

With fuel price hike deliberations still ongoing, the hardball lies not only in BI, but also in the hands of the President and his fellow politicians in the House of Representatives.

And this time, they had better not be late. The uncertainty must be ended very soon to safeguard our economic sustainability, looking at how foreign investors are now running away from the country at such a rapid, alarming pace.

Surely we do not want the massive capital outflow and exchange rate overshooting to continue, wrecking the economic fundamentals that we have carefully built since the 1997 financial crisis.

The writer is a journalist at The Jakarta Post.