BI says rupiah movements triggered by MSCI sentiment remain manageable

Jakarta (ANTARA) — Bank Indonesia (BI) says movements in the rupiah exchange rate remain manageable following Morgan Stanley Capital International’s (MSCI) announcement last week of a proposed change to Indonesia’s stock-market classification from emerging market to standalone market.

“So far, from what we can see, it is still manageable. The exchange-rate movements have not been excessive. It briefly weakened beyond Rp18,000 [after the MSCI announcement], but not by much. We can still manage it well. Hopefully, market participants will gradually digest the shock,” BI Head of Monetary and Securities Asset Management Erwin Gunawan Hutapea said in Jakarta on Friday.

MSCI announced the proposed reclassification on Thursday (15 October), local time. The market responded with a significant fall in the Jakarta Composite Index (JCI) on Friday (16 October), which dropped 11.57 per cent.

Meanwhile, the rupiah stood at Rp18,052 per US dollar on Friday (16 October), according to the Jakarta Interbank Spot Dollar Rate (JISDOR).

Erwin said BI had observed capital outflows from the stock market, but declined to disclose their size. Outflows had also occurred in government bonds (SBN) and Bank Indonesia Rupiah Securities (SRBI), he said.

To respond to market conditions, Erwin said, BI would ensure that rupiah liquidity remained adequate to facilitate transactions in the financial markets.

He added that BI could intervene if outflow pressures spread to the exchange rate and triggered volatility beyond its tolerance threshold, particularly if foreign-currency supply and demand failed to meet in the market.

At its October 2026 Board of Governors’ Meeting, BI kept the BI Rate unchanged at 5.75 per cent.

The lending facility rate also remained at 6.5 per cent. However, the deposit facility rate was raised by 25 basis points to 5 per cent.

BI said the decision was reinforced by an increase in policy incentives for hedging through the Domestic Non-Deliverable Forward (DNDF) instrument with BI. The measures are intended to attract foreign capital inflows while maintaining rupiah exchange-rate stability.

The hedging cost incentives apply to underlying transactions involving external financing, including portfolio inflows, banks’ offshore borrowing and foreign direct investment.

Under the DNDF incentives, the premium reduction has been increased from 25 per cent to 40 per cent for six-month tenors, and from 30 per cent to 45 per cent for 12-month tenors.

Earlier, at a BI Board of Governors’ Meeting press conference on Wednesday (21 October), BI Governor Destry Damayanti said the central bank continued to monitor risks in the domestic stock market, including the risk of foreign outflows, following MSCI’s announcement.

Destry said BI had assessed the risks associated with MSCI’s proposal. The central bank considered pressure on the rupiah to be within a relatively normal range, as regional conditions were also unfavourable at the time.

“For the past two days, we have indeed been discussing very intensively how to respond to this,” Destry said.