Bank Indonesia is ready to step in and support the rupiah in the foreign exchange market. The central bank wants to ensure the rupiah’s value against the US dollar is in line with its true economic fundamentals. Protests in Jakarta have impacted both the rupiah and the Indonesian stock market. Bank Indonesia plans to intervene in the market if needed to stabilize the currency.

Bank Indonesia’s Intervention Plan

Bank Indonesia’s statement shows they are serious about defending the rupiah, especially after it dropped below the 16,500 level against the dollar last Friday. This threat of intervention should limit the USD/IDR exchange rate in the short term. The protests have made the market nervous, and the central bank is firmly taking a stand. For traders using derivatives, there’s an opportunity to sell short-dated USD/IDR call options with strike prices above recent highs. The political uncertainty has increased implied volatility, making these options more expensive. We can gather this premium, expecting that the central bank will prevent a significant drop in the rupiah soon. We see this threat as credible since foreign exchange reserves were last reported at a solid $132 billion in August 2025. This approach is similar to what we observed during past interventions in 2022 and 2023 when global pressures weighed on the currency. The central bank has shown a consistent readiness to use its reserves to manage fluctuations.

Political Situation and Currency Stability

The main risk to watch in the coming weeks is the political climate in Jakarta. If the protests grow, Bank Indonesia may need to use its reserves more than planned or may have to let the currency weaken further. Any signs of resolution in the domestic conflict would likely support a stable or stronger rupiah. This defense is taking place while the US Federal Reserve keeps interest rates steady, a policy it has maintained throughout the summer of 2025. This makes it challenging for emerging market currencies, as higher US yields attract investments. So, Bank Indonesia faces challenges from both local political issues and a strong dollar. Create your live VT Markets account and start trading now.

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