SINGAPOREJAKARTA, April 17 Reuters Indonesia39;s economy was primed for monetary easing later this year, but an unwelcome plunge in its currency is complicating matters for Bank Indonesia and could force it to grudgingly raise rates as early as next week.

As Indonesian markets returned from a long Eid alFitr holiday this week, the rupiah sank to a fouryear low against a dollar buoyed by expectations that a hot U.S. economy will force the Fed to keep rates higher for longer.

As it slid past the psychological level of 16,000 to a dollar, stacking up a 5.25 loss for the year, some market participants felt Bank Indonesia BI might need to do something as drastic as a rate rise to arrest the slide.

BI is the only central bank in the world whose main mandate is currency stability.

Through 2023 and so far this year, it has used a range of intervention tools to keep the rupiah reined in as the dollar soared. Until last month, it was even expected to be among the first central banks in emerging Asia to start cutting rates.

As BI prepares to review policy on April 23, the thinking is changing. A hike would be its first since October. 

I think the risk of a hike is not small. I wouldn39;t put it as a baseline because they did hike previously, but I would think it39;s not small, said Alvin Tan, head of Asia FX strategy at RBC Capital Markets.

I think definitely, the rhetoric will have to turn a bit more hawkish in order to lend support to the currency.

A rate rise would help…