Monetary Strategy Shift: FX Reserve Efficiency vs. Exchange Rate Stability
During a working meeting with the DPR's Commission XI on September 28, 2026, Bank Indonesia (BI) Governor Destry Damayanti revealed a significant shift in the strategy for stabilizing the rupiah. According to CNBC Indonesia, intervention in the spot market now accounts for only 30% of total BI intervention, a drastic decline from the historical dominance of spot trading. This shift is driven by efficiency considerations, as direct dollar sales in the spot market significantly deplete foreign exchange reserves (forex reserves).
"We have now significantly reduced expensive intervention, which is through the spot market, accounting for about 30% of the total intervention we conduct," Destry stated. BI is now relying more heavily on derivative instruments such as the Domestic Non-Delivery Forward (DNDF) and Non-Delivery Forward (NDF), which are considered more effective in dampening volatility without directly draining forex liquidity.
Interest Rate Held at 5.75%: Inflation as the Primary Anchor
On the interest rate policy front, BI maintained the BI Rate at 5.75%. This decision is based on the assessment that inflation remains under control. Destry explained that core inflation is still stable around 2%, while headline inflation is recorded at 3.19%.
According to BI, the rise in headline inflation is influenced more by volatile food price components than by domestic demand pressures. Therefore, the policy response cannot rely solely on interest rate instruments but requires cross-sector coordination to control food prices.
External Pressures and the Risk of the Rp18,000/USD Level
Although BI is striving to maintain stability, external pressures remain the main challenge. CNBC Indonesia FX analyst Elvan Chandra Widyatama noted that the correction in the IHSG and the weakening of the rupiah to Rp17,900 per US Dollar at the close of the first session on Friday (September 25) were driven by global sentiment, specifically the rise in The Fed's benchmark rate and the surge in US Treasury yields.
This situation has prompted capital outflows from emerging markets, including Indonesia. We assess that with the US Dollar Index continuing to strengthen, the potential for further rupiah depreciation to the Rp18,000/USD level becomes a realistic scenario if external pressures do not subside.
Implications for Portfolios and Real Assets
This change in BI's strategy has direct implications for institutional and retail investors:
1. Dollar-Debt Issuers: Rupiah depreciation that could touch Rp18,000/USD will increase interest burdens for companies with dollar-denominated debt. We advise monitoring issuers in the banking and infrastructure sectors with high foreign currency exposure.
2. Export Sector: For export-oriented issuers, rupiah depreciation can serve as a positive catalyst for profit margins, particularly in commodity and export-oriented manufacturing sectors.
3. Asset Allocation: In conditions of exchange rate and global interest rate uncertainty, diversification into hedging assets such as gold or global bonds can be a prudent risk mitigation strategy.
"If our external sector is still weak, it will certainly be difficult, so we are discussing how to implement programs to boost exports and investment, including both real investment and portfolio investment," Destry affirmed.
In conclusion, BI is balancing the preservation of foreign exchange reserves with exchange rate stability. Investors need to monitor developments in government coordination to control food inflation and market responses to The Fed's next policy moves.
Sources
- Kuras Cadev, BI Kurangi Intervensi Rupiah di Pasar Spot! Sisa 30% — CNBC Indonesia
- Destry Bongkar Alasan BI Tahan Suku Bunga 5,75%: Inflasi Masih Jinak — CNBC Indonesia
- Video: Sebab Rupiah Melemah dan Berpotensi Tembus Rp 18.000/USD — CNBC Indonesia