The Indonesian rupiah fell below 10,000 to the dollar on Monday, for the first time in almost four years, on sustained dollar demand from local companies, traders said.
The rupiah's indicative prices fell 0.3% to 10,020 to the greenback, the weakest since early September 2009, and stood at 10,010 as of 0347 GMT.
The Indonesian currency was under pressure from corporate dollar bids such as for importers' dollar purchases, but the central bank was suspected of providing dollar liquidity, traders said.
Saktiandi Supaat, head of FX research for Maybank in Singapore, said the market "could be testing the 10,000 psychological barrier following comments late last week that the 10,000 threshold is not a Bank Indonesia hard target limit. Furthermore, BI seems to be allowing the rupiah to go above 10,000."
Indonesia's reserves remains "quite comfortable", Supaat said, adding the only worry now is if the rupiah "overshoots on the downside", which would worsen the deficits Indonesia is facing.
The rupiah is one of many emerging market currencies that has weakened since Federal Reserve Chairman Ben Bernanke talked in May about the possibility of begin to reduce US monetary stimulus.
Adding to pressure on the rupiah have been Indonesia's hefty current account and budget deficits. To help contain them, the government in late June raised domestic fuel prices - a move that has increased the inflation rate.
'NOT TOO VOLATILE'
Gundy Cahyadi, economist at OCBC Bank in Singapore, said he doesn't think BI has any specific target level for dollar/rupiah.
"Their intention is just to ensure that market moves are orderly and not too volatile, and I think, they have done pretty well on this front. Eventually, BI will certainly let market to determine the rate in the USD-IDR. The moves in the USD-IDR are in line with the regional trend, in which the strong USD tone still dominates," Cahyadi said.
The Indonesia stock market benchmark started the day up 0.1%, but slipped after the rupiah hit 10,000 and was down was down 0.7% at 0345 GMT.
On Thursday, Bank Indonesia surprised the market by raising the benchmark policy rate by 50 basis points to 6.50%, double the expected increase. In June, BI increased the policy rate 25 basis points, becoming the first Asian central bank to hike rates since 2011.
BI Deputy Governor Perry Warjiyo on Friday said no more rate rates should be needed as he was "very sure" the annual inflation rate - which could be 7.5% this month - would return to normal by September.
He also said he didn't see a risk that the foreign exchange reserves, which dropped to a two-year low of $98.1 billion at the end of June, would fall further.
