Key Moments
- USD/IDR traded around 18,040 during Asian hours on Tuesday as the Rupiah benefited from Bank Indonesia’s stabilization push.
- Bank Indonesia’s use of swaps and DNDFs has drawn approximately $8 to $8.5 billion in foreign inflows so far.
- The Jakarta Composite Index (JKSE) climbed 3% on Tuesday after authorities moved to curb selling following a severe 14.8% slide.
Rupiah Strengthens on Coordinated Policy Effort
USD/IDR extended its decline for a second straight session, with the pair trading near 18,040 during Asian hours on Tuesday. The Indonesian Rupiah (IDR) gained support as Bank Indonesia (BI) stepped up its stabilization campaign under the directive of President Prabowo Subianto.
On Monday, President Prabowo convened high-level discussions with senior economic policymakers, including the central bank governor, the finance minister, and the head of the Financial Services Authority (OJK). After the meeting, OJK Chief Friderica Widyasari Dewi stated that the regulator will continue to advance capital market reforms, prioritizing enhanced transparency, deeper liquidity, and strict enforcement of rules against regulatory breaches.
BI Instruments Draw Up To $8.5 Billion
BI Governor Destry Damayanti reported that swap facilities and domestic non-deliverable forwards (DNDFs) have attracted about $8 to $8.5 billion in foreign inflows to date. These tools are being deployed as part of broader efforts to stabilize financial conditions.
Regulators have also moved to address concerns over MSCI’s potential shift of Indonesia to standalone market status next year. Proposals include removing stocks with highly concentrated ownership from key benchmarks in order to improve price discovery and ease worries over market classification.
Jakarta Stocks Rebound After Steep Selloff
Jakarta’s benchmark stock gauge, the JKSE, rebounded 3% on Tuesday. The advance came after the index had dropped to a six-year low in the previous session, culminating in a sharp 14.8% decline over recent trading days that had briefly made it the weakest-performing equity market globally this year.
The turnaround in Indonesian shares followed new targeted measures by Jakarta authorities to restrict selling activity after a record two-day $82 billion market rout. That slump was initially sparked by an MSCI warning about possible index exclusion.
| Market Indicator | Recent Level / Change | Context |
|---|---|---|
| USD/IDR | Around 18,040 | Second consecutive day of Rupiah gains |
| Foreign inflows via swaps & DNDFs | $8 to $8.5 billion | Attracted by Bank Indonesia stabilization tools |
| JKSE | +3% on Tuesday | Rebound after 14.8% drop over recent sessions |
| Recent equity rout | $82 billion over two days | Triggered by MSCI warning on potential index removal |
MSCI Concerns and Regulatory Response
Market anxiety related to MSCI’s possible reclassification of Indonesia has eased as local regulators outlined changes to benchmark construction. By proposing to exclude stocks with highly concentrated ownership from major indices, policymakers aim to improve price formation and support overall market stability.
Dollar Softens on Fed Expectations
The weakening of USD/IDR has also been influenced by a softer US Dollar (USD), as market participants increasingly anticipate that the Federal Reserve (Fed) will keep interest rates unchanged. Fed Chair Kevin Warsh recently voiced confidence in the strength of the US economy, while avoiding specific indications about the timing or likelihood of future policy adjustments.
Data from the CME FedWatch tool show that Fed funds futures traders currently expect the Fed to leave rates steady at its October meeting, while assigning a 93.5% probability to a rate increase in December.
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