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Rupiah steadies as DBS points to Bank Indonesia policy continuity
DBS expects IDR support from non-rate measures, including swap incentives and more hedging-linked actions after BI’s June to July policy packages.
DBS Group Research said recent Indonesian developments have improved sentiment for the rupiah, citing more constructive onshore conditions after Indonesia’s parliament held fit and proper hearings for Bank Indonesia (BI) Governor nominee Destry Damayanti. In early remarks at the session, Damayanti emphasized continuity in BI’s policy toolkit, highlighting a robust mix of monetary, macroprudential and payments system tools and stronger policy coordination with fiscal authorities, according to the report.
FXStreet also noted that policy synergy expectations helped ease concerns over uncertainty and currency stability during the month. It pointed to a manageable inflation profile and supportive growth outlook, alongside BI policy packages introduced in June and July that added enhancements to hedging activity, including swap incentives and broader measures tied to local currency transactions.
The report said USD/IDR has eased off July highs and is hovering in a 17,700 to 17,900 range, helped by a broader US dollar pullback, with the IDR up about 1.6% in August. On the rates side, it added that the bond curve has kept a steepening bias, with the 10-year yield around 7% and short to belly securities benefiting from a lower frequency of SRBI auctions and reduced expectations for further tightening.
DBS further said foreign investors have returned to IDR debt, with nearly $1 billion of inflows in August, although foreign ownership remains around 13% of outstanding issuance. The firm expects the steepening bias to persist because the incoming governor is unlikely to act until FX or inflation pressures resurface, according to FXStreet.