Bank Indonesia (BI) has moved aggressively to intervene in parallel in the country’s currency and bond markets to prevent the rupiah from depreciating further in the face of a stronger United States dollar.

BI Governor Agus Martowardojo said in a statement published on Tuesday that the central bank would step up its efforts to defend the rupiah following a decline to a two-year low on Monday.

“BI will remain in the market to maintain the rupiah’s stability according to its fundamental value,” he said, claiming that the central bank had successfully eased the currency’s standing.

Agus cited BI data showing the rupiah on Monday, which depreciated by 0.12 percent, was in a better position compared to neighboring currencies, such as the Philippine Peso and Thai Baht, which weakened by 0.32 percent and 0.57 percent, respectively.

He claimed the global currency weakening was triggered by an increase in yields on US Treasury Bills, which had inched closer to 3 percent, fueling investor sentiment that the US Federal Reserve would increase its fund rate more than three times this year, beyond its earlier trajectory.

The rupiah traded at Rp 13,900 per US dollar on Tuesday, inching toward the psychologically important level of Rp 14,000, data from the Jakarta Interbank Spot Dollar Rate (JISDOR) showed. This compared to the Rp 13,894 per US dollar recorded a day earlier.

The rising optimism among investors regarding the US’ economic prospects and the ongoing trade-war tension between the US and China were the main factors hiking yields on US T-Bills, Agus said.

Bhima Yudhistira Adhinegara, an economist at the Institute for Development of Economics and Finance (INDEF), said demand for US dollars would continue to increase approaching the Ramadhan and Idul Fitri festivities in May and June, as rising household spending would increase imports of raw materials and consumer goods.

Bhima argued that the management of Indonesia’s economic fundamentals was the major factor in the current rupiah depreciation, calling for the government to maintain energy and food prices during the period leading to Ramadhan.

He said maintaining benign consumer prices during the major festivities would ensure a steady level of consumer spending, which contributes more than half of Indonesia’s gross domestic product.

As heavy market intervention could deplete foreign exchange reserves in the long run, Bhima suggested that BI could instead raise its benchmark rate — the seven-day reverse repo rate — by 25 basis points in May as a final option to maintain the rupiah’s stability.

However, Coordinating Economic Minister Darmin Nasution insisted that external factors, rather than Indonesia’s economic fundamentals, played a major role in the rupiah depreciation, calling for calm as it had little effect on domestic inflation.

Inflation stood at 3.4 percent year-on-year in March, still within the government’s target range of between 2.5 percent and 4.5 percent.

“There is nothing that forces us to take [extra measures]. We don’t actually need to panic,” he said.

The rupiah depreciation is expected to continue affecting the performance of the Jakarta Composite Index (JCI) — the main gauge of the Indonesia Stock Exchange (IDX) — throughout the week as foreign investors reduce their stock portfolios on the back of US economic improvement, said Alfred Nainggolan, research head of Koneksi Kapital Sekuritas.

The JCI slid by 1.24 percent to 6,229.6 in Tuesday’s trading, from 6,308.1 recorded a day earlier.

Alfred pointed out that BI’s decision last month to maintain its benchmark rate at 4.25 percent had sapped confidence in the capital market, triggering the JCI to slump and quickly dragging the rupiah downward.

— Winny Tang and Anton Hermansyah contributed to the story

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