Rupiah Exchange Rate Determined by Bond Market
The Chief Economist of Trimegah Sekuritas Indonesia, Fakhrul Fulvian, stated that stabilising the rupiah exchange rate requires larger capital inflows. The bond market is considered the most decisive factor in determining the rupiah’s direction, as it serves as the main entry point for foreign portfolio capital.
“Foreign investors have indeed begun to return to buying Indonesian bonds, but in my view, this process is still in its early stages,” Fakhrul said in a written statement. According to him, to generate sustainable capital flows, the Indonesian bond market needs to offer sufficiently attractive yields compared to the still-high levels of global risk.
He continued that Bank Indonesia’s (BI) steps to tighten liquidity management provide a proper foundation. For context, BI has raised its benchmark interest rate three times to 5.75 per cent.
Nevertheless, Fakhrul argued that the success of this stabilisation process requires policy consistency from both Bank Indonesia and the Ministry of Finance. “The next challenge is no longer just halting pressure on the rupiah, but building investor confidence that the bond market normalisation process will be carried out consistently until Indonesia returns to being one of the primary destinations for portfolio investment in the region,” he said.
According to a report by the Bank Rakyat Indonesia (BRI) economist team, foreign investors recorded capital inflows of Rp 70.39 trillion in June 2026, alongside increasing yields on Bank Indonesia Rupiah Securities (SRBI). Meanwhile, foreign capital entering through Government Securities (SBN) amounted to Rp 20.13 trillion.
However, the bid-to-cover ratio for SBN and SRBI in June was recorded below the 2025 historical average. The bid-to-cover ratio for SBN was 1.82 times, lower than the 3.19 times recorded in 2025. Meanwhile, the bid-to-cover ratio for SRBI was 1.98 times, lower than the 2025 average of 2.80 times. “The simultaneous decrease in the bid-to-cover ratio for both SBN and SRBI indicates that investor demand for domestic financial assets is relatively limited in aggregate,” wrote the BRI economist team in their study.