Rupiah Hovers Near IDR 18,000 as BI Adjusts Policy Tools

The Indonesian rupiah traded near IDR 18,000 per U.S. dollar on Wednesday, recovering from an intraday low of IDR 18,060 after Bank Indonesia kept its key interest rate unchanged at 5.75% for a fourth straight month. To support the currency amid a market selloff sparked by MSCI’s warning over Indonesia’s market status, the central bank raised its deposit facility rate by 25bps to 5% and enhanced incentives for DNDF hedging to help attract foreign capital. Meanwhile, to bolster domestic liquidity, the board cut the reserve requirement ratio by 1 ppt to 8% starting Nov. 1 and further to 7% from Dec. 1, a measure expected to inject around IDR 190 trillion into the financial system. Governor Destry Damayanti noted that cumulative rate hikes of 100bps earlier this year had helped anchor inflation expectations. Globally, the dollar index steadied after touching a three-week low, helped by rising oil prices that rekindled inflation concerns and reinforced safe-haven demand for the greenback.

The Indonesian rupiah hovered near IDR 17,970 per dollar on Wednesday, extending strength for a third session as the US dollar remained under pressure after the dollar index fell to a three-week low. Softer US Treasury yields and easing crude oil prices reduced support for the greenback, helping lift emerging market currencies, including the rupiah. Traders awaited Bank Indonesia's policy decision later today, with markets expecting the central bank to raise its key rate by 25bps to 6% after keeping it steady for the third straight month following 100bps of cumulative hike earlier this year. Sentiment was also aided by receding concerns over MSCI potentially reclassifying Indonesia as a standalone market, after regulators launched measures to address concentrated share ownership and strengthen disclosure requirements. However, the upside was capped by persistent fiscal concerns and cost pressures, as El Niño-related food prices accelerated and September inflation hit a three-month top.

The Indonesian rupiah extended gains, hovering near IDR 18,000 per dollar on Tuesday as the dollar index slipped and traders weighed the Fed’s policy outlook ahead of its October meeting. Meanwhile, Bank Indonesia intensified stabilisation efforts under President Prabowo’s directive, with Governor Destry Damayanti noting that swap instruments and domestic DNDFs had attracted about US$8–8.5 billion in inflows to date. The central bank began its two-day policy meeting, with markets expecting rates to remain unchanged for a fourth straight month following cumulative rate hikes of 100bp since May. Concerns over MSCI’s potential reclassification of Indonesia to standalone market status next year eased after regulators proposed excluding stocks with highly concentrated ownership from benchmarks to improve price discovery. However, overall sentiment stayed fragile as elevated oil prices threatened fiscal conditions and inflationary pressures persisted amid rising food costs linked to El Niño.