Bank Indonesia: says it’s in the market to stabilize rupiah

Bank Indonesia: says it’s in the market to stabilize rupiah

Indonesia's central bank, Bank Indonesia (BI), has reiterated its commitment to maintaining stability in the foreign exchange market, particularly for the rupiah, following a significant drop in its value against the U.S. dollar. On Friday, the rupiah experienced a sharp decline, reaching its weakest level since August 1, 2024, before recovering somewhat. This volatility has prompted BI to step in to stabilize the currency.

Erwin Gunawan Hutapea, the head of BI's monetary department, stated that the bank will continue to intervene in both offshore and onshore non-deliverable forward markets, as well as the spot market, to ensure the rupiah aligns with its fundamentals [1]. Additionally, BI will continue to purchase government bonds on the secondary market to support the currency.

The recent depreciation of the rupiah and the subsequent market volatility can be attributed to several factors, including escalating political protests in Jakarta. Tensions have been rising due to student demonstrations against lawmakers' pay and education funding. A motorcycle rider died in a violent clash with police, further exacerbating the situation. These events have rattled investor confidence, leading to a significant drop in Indonesian stocks and the rupiah [2].

Despite the market turbulence, BI's director, Erwin Gunawan Hutapea, emphasized that the bank remains committed to market stability. He reiterated that the bank will continue to take necessary actions to stabilize the rupiah and maintain confidence in the Indonesian financial system [1].

In response to the 2% dip in the stock market, the director of Indonesia's stock exchange regulator, Jeffrey Hendrik, noted that market fundamentals remained strong and that technical corrections are normal. The Jakarta Composite Index tumbled as much as 2.3% in early trading before paring losses to close down 1.3% [3].

The rupiah's recent performance has been influenced by broader regional and global factors, including expectations around U.S. inflation data and the Federal Reserve's policy direction. The dollar index rose 0.2% on Friday but has weakened 2% this week as bets of Fed rate cuts have pressured the greenback. Barclays' analysts noted that most Asian currencies have underperformed expectations, with several central banks intervening to limit gains [3].

Overall, BI's intervention in the foreign exchange market aims to provide stability and confidence in the Indonesian financial system amidst political and economic uncertainties. As the central bank continues to monitor market conditions, investors and financial professionals should closely watch for any further developments and potential policy adjustments.

References:
[1] Reuters. (2025, August 29). Indonesia's central bank says it will remain active in FX market after rupiah dips. Retrieved from https://www.tradingview.com/news/reuters.com,2025:newsml_P8N3R702I:0-indonesia-central-bank-says-it-will-remain-active-in-fx-market-after-rupiah-dips-1/
[2] Reuters. (2025, August 29). Indonesia remains active in FX market after rupiah slide, central bank says. Retrieved from https://www.reuters.com/world/asia-pacific/indonesia-remain-active-fx-market-after-rupiah-slide-central-bank-says-2025-08-29/
[3] Yahoo Finance. (2025, August 29). Emerging markets: Indonesian rupiah, shares fall on political protests, central bank intervention suspected. Retrieved from https://sg.finance.yahoo.com/news/emerging-markets-indonesian-rupiah-shares-083611300.html