SINGAPORE: Indonesia’s rupiah languished at a two-week low on Wednesday while shares climbed, after the country’s central bank kept policy rates unchanged amid turmoil in local markets on concerns over growth and fiscal strategy.
The rupiah, Asia’s worst-performing currency so far this year, was last down 0.6% at 16,525 per dollar, its lowest since March 3.
Meanwhile, stocks were up 1.5%. The benchmark index suffered its biggest fall in nearly three years on Tuesday, with the drop leading to a 30-minute trading halt on breaching the 5% mark.
Bank Indonesia (BI) kept policy rates unchanged for a second straight review, as expected, and kept its growth outlook for 2025 at 4.7% to 5.5%.
“Looking forward, BI will continue to observe prospects of inflation and economic growth to take advantage of room for a BI rate cut, while considering the rupiah movement,” Governor Perry Warjiyo said at a press conference.
The decision comes at a time when Indonesian markets have been sliding for months on worries about the country’s fiscal health, prompting questions about some government policy moves and weakening domestic demand.
Foreign investors have pulled money from stocks and started selling high-yielding bonds, spooked by President Prabowo Subianto’s massive social spending plans, proposals to get the military into civilian roles and speculation that reputed finance minister Sri Mulyani may resign.
On Wednesday, Indonesia’s financial services regulator allowed listed companies to buy back their stocks without shareholders’ approval, while the central bank conducted currency intervention to calm spooked markets.
Lavanya Venkateswaran, senior ASEAN economist at OCBC Bank, said the central bank decision was focused on maintaining rupiah stability, but warned of risks to growth in the coming months.
“We still assess BI as having room to cut rates further, albeit to a limited degree. We forecast another 25bp rate cut from BI this year,” Venkateswaran said.
Other Asian stock markets were broadly higher. Stocks in South Korea, Singapore and Thailand added between 0.4% and 1%.
Regional currencies were largely muted against a broadly steady dollar. Thai baht and Singapore dollar inched down 0.2% each, while Malaysian ringgit added 0.2%.
Global markets’ focus is now on the US Federal Reserve’s interest rate decision later on Wednesday, where the central bank is expected to keep rates on hold.
The Fed’s policy decision will be crucial for investors eager to know the central bank’s take on President Donald Trump’s erratic tariff policies and their impact on the US economy.
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