Possible BI intervention drives Indonesian Rupiah gains

• Market intervention by Bank Indonesia could support the Indonesian Rupiah, even as bond yields climb and foreign capital outflow risks persist.
• Two officials favoured an immediate interest rate increase, but the Fed suspended rate hikes in October despite elevated inflation.
• With inflation and price pressures still elevated, the Fed nevertheless put rate hikes on hold to evaluate incoming economic data.

USD/IDR traded around 18,127 during Thursday’s Asian session. The pair extended its decline after retreating from 18,223, a nearly 5-month high reached on 27 October. Proactive support from Bank Indonesia (BI) has strengthened the Indonesian Rupiah (IDR), weighing on the pair.

Currency stabilisation remains a priority for BI, which recently reaffirmed its commitment to intervening in Non-Deliverable Forward (NDF), Domestic Non-Deliverable Forward (DNDF) and spot markets. Targeted government bond purchases in the secondary market also form part of its approach.

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

Regulatory uncertainty has also prompted continued selling by foreign investors, adding to these pressures. Unresolved questions over Indonesia’s MSCI market status have further weakened sentiment. The possibility of a future downgrade to standalone status continues to fuel concerns about sustained capital outflows.

A widely expected Federal Reserve (Fed) decision to leave interest rates unchanged reversed recent gains in the US Dollar (USD). The central bank offered little guidance on its next policy step. Rates remained at 3.75%–4.00%, with the Fed noting continued economic expansion. Its official statement pointed to resilient domestic spending, solid capital investment and strong productivity growth. On its labour market mandate, the Fed said employment gains had matched workforce growth, while the unemployment rate had changed little.

Although the Fed recognised that inflation pressures remain elevated, it deferred further rate increases to collect more data and determine the appropriate monetary policy stance. The vote was split. Fed Governor Lisa Cook and Cleveland Fed President Beth Hammack opposed the decision, preferring an immediate rate rise.

Price stability and the 2% inflation target remain commitments of the Federal Open Market Committee, Fed Chair Kevin Warsh reiterated, stressing the economy’s underlying strength. Warsh also set out the central bank’s forthcoming timetable: eight meetings next year, including one without a formal vote. He expects six policy-setting meetings in 2028.