Is possible BI intervention behind the Indonesian Rupiah’s gains?

• The Indonesian Rupiah could receive support from Bank Indonesia’s market interventions, even as bond yields rise and foreign capital outflow risks persist.
• Despite elevated inflation, October brought a pause in the Fed’s rate hikes; two officials dissented, preferring an immediate interest rate increase.
• Further rate hikes were put on hold by the Fed to allow an assessment of economic data, even as it recognised that inflation and price pressures remained elevated.

Strength in the Indonesian Rupiah (IDR), supported by Bank Indonesia’s (BI) proactive measures, continues to weigh on USD/IDR. The pair traded near 18,127 during Thursday’s Asian session, extending its retreat from the nearly 5-month high of 18,223 recorded on 27 October.

Interventions in Non-Deliverable Forward (NDF), Domestic Non-Deliverable Forward (DNDF) and spot markets remain part of BI’s commitment to currency stability, which it recently reaffirmed. The central bank also reiterated its use of targeted government bond purchases in the secondary market.

Wider fiscal and market pressures nevertheless remain evident despite the central bank’s interventions. With investors assessing mounting concerns about inflation and national fiscal risks, Indonesia’s 10-year government bond yield climbed to 7.707% on Thursday. That was its highest level in six years and well above the 2026 budget benchmark of 6.9%.

Regulatory uncertainty has also kept foreign investors selling, adding to these challenges. Further weighing on sentiment are unresolved questions over Indonesia’s MSCI market status: the prospect of a future downgrade to standalone status continues to fuel concerns about sustained capital outflows.

Recent gains in the US Dollar (USD) were erased after the Federal Reserve (Fed) left interest rates unchanged, as widely anticipated, but offered little guidance on its next policy decision. Rates remained at 3.75%–4.00%, with the Fed observing that economic activity was still expanding. Its official statement pointed to resilient domestic spending, robust capital investment and strong productivity growth. On the labour market, the central bank noted that employment gains had matched growth in the workforce, while the unemployment rate had changed little.

Although the Fed recognised that price pressures remained elevated, it opted to suspend further rate increases while collecting more data and evaluating the appropriate monetary policy stance ahead. Two officials opposed the decision: Fed Governor Lisa Cook and Cleveland Fed President Beth Hammack voted for an immediate rate increase instead.

With the underlying economy still strong, Fed Chair Kevin Warsh reiterated the Federal Open Market Committee's commitment to price stability and its 2% inflation target. Turning to the central bank's forthcoming schedule, he said eight meetings would take place next year, including one without a formal vote. He also indicated that he expects six policy-setting meetings in 2028.