Rupiah breaches key psychological level as market rout deepens 

JAKARTA – The Indonesian rupiah fell through the key psychological level of 18,000 per US dollar on June 4 and stocks hit a near six-year low, as mounting policy uncertainty and macro headwinds spooked investors.

The currency slumped 0.5 per cent to 18,049 per US dollar as at 5pm Singapore time, taking its losses in 2026 to about 8 per cent. The benchmark Jakarta Composite Index slid as much as 5 per cent before closing down 1.7 per cent. Both assets are Asia’s worst performers this year.

Against the Singapore dollar, the rupiah also dropped to new lows and was down 0.4 per cent at 14,051.21, making for a 9.3 per cent year-to-date fall.

On June 4, Bank Indonesia (BI) confirmed it had stepped into currency markets, with senior deputy governor Destry Damayanti saying in a text message that the central bank would “increase the intensity of its interventions” to ensure orderly market functioning and maintain rupiah stability in line with fundamentals.

BNP Paribas, MUFG Bank and PT Mega Capital Sekuritas expect BI may raise interest rates as soon as June to stem the rupiah’s slide. 

A break well beyond 18,000 could accelerate foreign outflows from local stocks and bonds, which has made the level a key test for policymakers seeking to restore confidence in an economy facing rising headwinds. Global funds have already offloaded US$3.3 billion (S$4.2 billion) worth of local stocks in 2026, and another US$653 million worth of bonds. 

The sell-off comes as investors grow more wary of Indonesia’s economic outlook and fiscal position under President Prabowo Subianto. Elevated oil prices have further strained government finances, and fears over greater state intervention in commodity exports, potential rating pressure and an MSCI reclassification decision have driven funds to the sidelines. 

The abrupt firing this week of the head of Indonesia’s nutrition agency – central to Prabowo’s free meals programme – and a subsequent corruption probe have added to unease.

“Until there is further clarity on domestic concerns, such as on export control and the MSCI review, the pressure remains on the downside for Indonesia assets,” said Wee Khoon Chong, Asia-Pacific market strategist at BNY. 

Concerns about Indonesia’s credit rating resurfaced this week after Coordinating Economic Minister Airlangga Hartarto said he met representatives from S&P Global Ratings in an “annual meeting”, without specifying when it took place. He said the government used the meeting to highlight efforts to sustain economic growth through a range of strategic measures, according to a social media post. 

To boost confidence, the central bank has rolled out a series of measures to support the local currency and attract inflows, including issuing rupiah-denominated bills and tightening requirements for US dollar purchases. In May, it surprised markets with a 50-basis-point rate hike. Its next policy decision is due on June 18.

BI’s intensive interventions have come at a cost, though, with the nation’s foreign-exchange reserves falling further in April to the lowest in nearly two years. Fitch has warned that a sharp decline in the reserves coverage might lead to negative rating action.

Capital market regulators have also rolled out reform measures to boost confidence, though many remain wary about the MSCI’s decision later in June and the removal of several big stocks from its indexes. BLOOMBERG

With additional information from The Straits Times