Rupiah Under Pressure on MSCI Downgrade Risk

The Indonesian rupiah weakened past IDR 18,050 per U.S. dollar on Friday, its weakest level since early August, after MSCI questioned Indonesia’s emerging-market status. The index provider flagged dysfunction in local stock markets and outlined a possible shift to standalone-market reclassification, which could trigger massive capital outflows. The prospect added pressure on the currency amid persistent volatility. Meanwhile, Bank Indonesia is set to hold a policy meeting next week after maintaining its benchmark interest rates at 5.75% for three straight months through September, following 100bp hikes in May and June, while continuing forex intervention to support the currency. September inflation accelerated to 3.28%, driven by persistent food price pressure. Globally, the dollar index eased but remained firm near 102, as resilient U.S. data reinforced expectations of further Fed tightening. For the week, the rupiah slipped around 0.4%, reversing gains in the previous two periods.

The Indonesian rupiah briefly slipped to around IDR 17,970 per U.S. dollar on Thursday morning before recovering to near 17,930 after Bank Indonesia said the currency trajectory remained in line with regional peers. The central bank reaffirmed its commitment to stabilising the rupiah through interventions in offshore and onshore NDFs as well as spot markets. Forex reserves eased a bit in September but stayed near a five-month top. The IMF lifted its 2026 growth forecast for Indonesia to 5.1% from 5.0%, citing measures to support household consumption and an expected pickup in government spending, though it warned geopolitical conflicts and energy supply risks could weigh on oil-importing economies. Inflation accelerated to 3.28% yoy in September, underscoring persistent price pressures that may complicate the policy outlook. Globally, the U.S. dollar index held firm despite edging off an 18-month high as traders assessed the Fed’s stance following stronger-than-expected inflation data.

The Indonesian rupiah edged up, hovering near IDR 17,890 per U.S. dollar on Wednesday after trading in a narrow range in recent sessions, with Bank Indonesia continuing to support the currency through spot, domestic non-deliverable forward (DNDF) and offshore NDF interventions. However, overall sentiment remained fragile as the U.S. dollar stayed broadly firm ahead of key U.S. inflation data due later today. Separately, the International Monetary Fund warned that geopolitical conflicts and energy supply disruptions posed risks to oil-importing economies such as Indonesia. Nevertheless, it raised its 2026 growth forecast for Indonesia to 5.1% from 5.0%, citing measures to support household purchasing power and an expected acceleration in government spending toward year-end. Meanwhile, market volatility persisted ahead of MSCI’s November review of Indonesian equities, while tighter global financing conditions continued to expose the rupiah to shifts in foreign capital flows.