Rupiah Exchange Rate Determined by Bond Market

Trimegah Sekuritas Indonesia Chief Economist Fakhrul Fulvian stated that stabilising the rupiah exchange rate requires greater capital inflow. The bond market is considered the most decisive factor for the rupiah’s direction as it is the main entry point for foreign portfolio capital flows. “Foreign investors are indeed starting to buy Indonesian bonds again, but I think the process is still in its early stages,” Fakhrul said in a written statement on Saturday, 4 July 2026. According to him, to generate sustainable capital flows, the Indonesian bond market needs to offer yields that are sufficiently attractive compared to the still-high global risks. He continued that Bank Indonesia’s (BI) move to tighten liquidity management is the right foundation. For information, BI has raised its benchmark interest rate three times to 5.75 per cent. However, Fakhrul argued that the success of the stabilisation process requires policy consistency from BI and the Ministry of Finance. “The next challenge is no longer stopping the pressure on the rupiah, but building investor confidence that the bond market normalisation process will be carried out consistently until Indonesia once again becomes a primary destination for portfolio investment in the region,” he said. In a report by the Bank Rakyat Indonesia (BRI) economist team, foreign investors recorded capital inflows of Rp 70.39 trillion in June 2026 amid rising yields on Bank Indonesia Rupiah Securities (SRBI). Meanwhile, foreign capital entering through Government Securities (SBN) amounted to Rp 21.03 trillion. Even so, the bid-to-cover ratio for SBN and SRBI in June was recorded below the historical average for 2025. The bid-to-cover for SBN was recorded at 1.82 times, lower than the 2025 figure of 3.19 times. Meanwhile, the bid-to-cover for SRBI was recorded at 1.98 times, lower than the 2025 average of 2.80 times. “The simultaneous decline in bid-to-cover for SBN and SRBI indicates relatively limited aggregate investor demand for domestic financial assets,” wrote the BRI economist team in their study.