The plan: same intensity, new mix of tools
In her first sit down since she stepped into the job last month, Destry Damayanti told Bloomberg News on Thursday that Bank Indonesia is not easing up on its rupiah defense. The playbook is evolving, though. "We are diversifying without changing the intensity of our policy to maintain the stability of the rupiah," she said.
Here is what that looks like in practice: spot FX transactions are now about 30% of BI's total interventions, with the bulk executed through non deliverable forwards in both local and offshore markets. The shift is designed to conserve foreign exchange resources while keeping pressure where it matters.
Why derivatives now, and how BI decides
Reserves stood at $146.5 billion in August and have steadied in recent months as the central bank widened its use of NDFs. BI weighs conditions trade by trade, judging where dollar demand is coming from and how quickly it needs to be met. The central bank is also nudging firms that have maturities coming due to hedge if they do not need dollars right away.
There is a line BI will not hesitate to cross. "If the supply of dollars is truly shrinking and demand is high in the spot market, we have no choice but to enter the spot market," Destry said. Or as she put it with a wink to the craft of the job: "Managing monetary operations is, after all, an art."
Market backdrop: pressure points and a targeted response
The rupiah has softened since Destry took the helm, sliding from roughly 17,700 per dollar in early September and briefly crossing 18,000 later in the month. It is off about 7% this year, the weakest in Asia, as costlier crude and a climb in US Treasury yields have weighed on emerging markets, Indonesia included.
BI has been using offshore NDFs carefully, especially since last April after President Donald Trump's tariffs rattled global markets. The goal is to stop outsized moves in the rupiah's offshore NDF quotes during non local hours from spilling over when Jakarta opens. That targeted stance extends beyond FX too, as BI navigates a sturdier dollar, higher US yields, and loftier oil prices.
When policymakers adjust their approach, patient investors rely on consistent plans, so download the free Always Be Buying E-Book
The rupiah tends to come under strain when money leaves Indonesian assets as the gap between Indonesian government bond yields and US Treasuries tightens. "Maintaining a yield spread that investors receive at a fairly affordable cost is key. Money has no loyalty," Destry said, noting Indonesia is vying with peers such as the Philippines and India for capital.
Rates, growth, and what investors should watch
Destry reiterated that policy is anchored on stability, noting that the cumulative 100 basis point tightening during the second quarter was taken in advance to shield the rupiah. BI will stay data dependent on what comes next. At the same time, the bank wants to keep growth on track because output is still running below potential. With price pressures largely coming from the supply side, rate adjustments alone can only do so much.
To help keep the yield pickup appealing without leaning solely on hikes, BI is favoring targeted steps like hedging incentives. According to Destry, these measures can raise investors' effective returns in the range of 40 to 50 basis points and have already funneled funds into SRBI (Bank Indonesia Rupiah Securities) and into government bonds. On the bank's expanded mandate to be "conducive" to growth, she was clear that stability is the foundation: for the real economy to expand and for jobs to materialize, markets must be steady. She stressed that advancing growth requires joint effort and said the objective is an economy that expands in a way they hope will endure.
Even as strategies evolve, steady habit matters most for savers, so get the free Always Be Buying E-Book
