BI Promises to Directly "Interfere" in the Market

JAKARTA, KOMPAS — Bank Indonesia promises aggressive market intervention to stabilize the rupiah. This measure is being taken amidst pressure on the rupiah following the continued decline of the stock market and the strain on the global foreign exchange market in recent days.

"Pressure on the rupiah exchange rate has occurred in the offshore market (NDF) during the extended domestic market holiday in observance of Eid al-Fitr 1446 H," said the Head of the Communication Department of BI, Ramdan Denny Prakoso, through a press release on Tuesday (7/4/2025).

Previously, BI announced a holiday for all operational activities, including rupiah monetary operations and foreign exchange (forex), from March 28 to April 7, 2025. The 11-day holiday coincided with national holidays and collective leave related to Eid al-Fitr 2025. BI will resume operations starting today, Tuesday, April 8, 2025.

The reciprocal tariff policy announced by the U.S. government on April 2, 2025, and the retaliatory tariff policy response by the Chinese government on April 4, 2025, according to Denny, have caused turmoil in the global financial markets. As a result, capital outflows and exchange rates in many countries, particularly developing nations, have come under pressure.

Therefore, BI will undertake continuous interventions in the offshore market across Asia, Europe, and New York. BI will also aggressively intervene in the domestic market starting from the opening of the market on April 8, 2025, in the foreign exchange market, both spot and domestic NDF, as well as the purchase of Government Securities in the secondary market.

"In addition, BI will also optimize rupiah liquidity instruments to ensure sufficient liquidity in the money market and domestic banking sector. This series of measures by BI is aimed at stabilizing the rupiah exchange rate and maintaining market participants' and investors' confidence in Indonesia," said Denny.

AFP News Agency reported that Asian and European stock markets on Monday (7/4/2025) plummeted following China's retaliatory tariffs against the United States (US). Tokyo's Nikkei 225 index dropped by 7.83 percent, while Hong Kong's Hang Seng index fell by 13.22 percent, marking its lowest point since the Asian financial crisis in 1997.

In fact, analysts describe the global stock market collapse as reminiscent of crises that occurred in the last century. After the Covid-19 pandemic was announced on March 12, 2020, for example, Paris stock prices fell 12 percent, Madrid 14 percent, and Milan 17 percent, while London stock prices fell 11 percent and New York 10 percent or the worst since 1987.

On the other hand, Reuters News Agency reported that investors have sold the US dollar and shifted it to currencies considered safe havens, such as the Japanese yen and Swiss franc. This was done after US President Donald Trump on April 2, 2025 announced the implementation of high import tariffs on its trading partners starting April 9, 2025.

"The big theme is selling the U.S. dollar against the Japanese yen, because it's a good proxy for a U.S. recession and it's a good proxy for U.S. yields and U.S. yields are falling," said Brent Donnelly, president of market maker and analytics firm Spectra Markets.

The US dollar index against several major world currencies (DXY) was in the range of 102 on Monday (7/4/2025) trading or down 5.12 percent on a calendar year basis. The yield on 10-year US Treasury bonds moved below 4 percent or tended to fall compared to its highest point in mid-January 2025 which reached 4.79 percent.

At the same time, based on Bloomberg data, the rupiah exchange rate opened at Rp16,897 per US dollar in global spot trading. The rupiah on Monday (7/4/2025) tended to move in the range of Rp16,777-17,223 per US dollar.

Meanwhile, the rupiah exchange rate in the last trading of the Jakarta Interbank Spot US Dollar on March 27, 2025, before entering the red date, closed at Rp16,566 per US dollar. This means that the rupiah is around 300 points behind the spot movement in the global market.

Seeing the market conditions, Bank Indonesia (BI) held a Board of Governors Meeting (RDG) to discuss the current global market situation, Monday (7/4/2025). The BI RDG decided to intervene in the off-shore market or Non Deliverable Forward (NDF) to stabilize the rupiah exchange rate from high global pressure.

UPN Veteran Jakarta economist and public policy expert Achmad Nur Hidayat assessed that BI was late in anticipating the global situation that continues to fluctuate. Instead of building domestic economic resilience, BI and the government are instead scapegoating external problems.

"This step (intervention) seems repetitive, but the results are less than satisfactory. Only as an ineffective damage control effort, not a mature anticipation. In fact, since early March 2025, the signal of the US-China tariff increase has been clear," he said when contacted from Jakarta.

The resilience of the domestic economy is reflected in Indonesia's current account deficit and foreign debt. Indonesia's current account deficit in 2025 is predicted to swell to 1.18-2.3 percent of Gross Domestic Product (GDP).

Meanwhile, Indonesia's foreign debt as of January 2025 reached 427.5 billion US dollars. This is an increase of 5.1 percent annually and the highest in Southeast Asia.

According to Achmad, the current account deficit was mainly triggered by chronic import dependence in the retail, manufacturing, and energy sectors. The foreign debt position, which is considered to remain under control and dominated by long-term debt, is at risk of becoming a time bomb considering the dynamics of recent times have become increasingly unfavorable.

"BI's aggressive intervention in the foreign exchange market and the purchase of SBN are just painkillers. Without fixing domestic fundamentals, the rupiah will continue to be trapped in a crisis cycle," he said.

Bank Danamon economist Hosianna Evalita Situmorang said that intervention in the offshore market was the first step taken by BI to stabilize the exchange rate. This shows BI's increased flexibility in maintaining exchange rate stability globally, not only in the domestic market.

"This step (market intervention) is very crucial to keep expectations anchored, because if not managed well, pressure on the rupiah can trigger unanchored expectations which risk driving imported inflation, increasing the cost of funds, and psychological pressure on the money market," he said.

On the other hand, the government has chosen a diplomatic path towards trade tensions, reflecting an effort to maintain economic credibility without confrontation.

Going forward, it is important for stakeholders to strengthen the foreign exchange structure, deepen financial markets, and fiscal discipline, so that Indonesia remains resilient amid increasingly volatile external dynamics.

Hosianna warned of potential pressure on domestic financial markets, especially the foreign exchange and stock markets, which will open for the first time on April 8, 2025. This is considering that the majority of Asian exchanges are still continuing to correct. The weakening of the rupiah in the global market has also continued since Trump's tariff announcement.

In the last trade, precisely on March 27, 2025, the Composite Stock Price Index (IHSG) closed at 6,510.62 or strengthened by 0.59 percent compared to the previous day. Although it will only be opened on April 8, 2025, IHSG in the Google search engine on Monday (7/4) was corrected by 11.46 percent to the level of 5,700.

Economist of the Institute for Economic and Community Research, Faculty of Economics and Business, University of Indonesia (LPEM FEB UI), Teuku Riefky, assessed that with the current global dynamics, it is likely that the JCI and rupiah at the market opening on April 8, 2025 will be under pressure. However, the intervention steps taken by BI are considered effective.

"Although it was high (rupiah), BI intervened in the NDF market, so we see that the rupiah has started to strengthen a little. Is this too late? I don't think so, it's quite on time, but the pressure is indeed very big, especially from the Trump factor," he said.

According to Riefky, policy makers should also anticipate various risk factors in the future, both in terms of trade and investment barriers.

In this case, the government is expected to undertake diplomacy and negotiations with the US Government, while also opening up new market opportunities by collaborating with other trading partners, in order to minimize disruption from US tariff policies.