The Bank of Indonesia announced on Friday that it will take decisive measures to intervene in the foreign exchange market to maintain market confidence and balance foreign exchange supply and demand. Previously, the Indonesian rupiah fell 0.7% against the US dollar to 16578, the lowest level since April 2020.

We will decisively enter the market to maintain a balance between foreign exchange supply and demand, and ensure stable market confidence. "- Edi Susianto, Executive Director of Monetary Management at Bank Indonesia

The Indonesian central bank took intervention measures on Thursday, but still failed to prevent the depreciation of the Indonesian rupiah. Since the beginning of this year, the Indonesian rupiah has depreciated by nearly 3%, performing the worst among major emerging market currencies in Asia.

Trump's tariff policy intensifies pressure on Asian markets

The decline of the Indonesian rupiah is partly attributed to the tariff policies promoted by the Trump administration. As the US tariffs on Canada and Mexico are about to take effect, market risk aversion is heating up, and Asian currencies as a whole are facing depreciation pressure.

In addition, the uncertainty of the Federal Reserve's interest rate cut path has also increased market volatility.

Alan Lau, a strategist at Malayan Banking Bhd, said that market sentiment is biased towards safe haven, and the Indonesian rupiah may continue to be under pressure in the future, but it is still necessary to pay attention to whether Trump's tariff policies will really be implemented.

At present, there are still variables in the situation, and it is unclear whether Trump's tariff threat is a negotiation strategy or will be truly implemented. "- Alan Lau

At the same time, the Jakarta Composite Index fell 3% on Friday, falling more than 20% from its historical high in September last year, officially entering a technical bear market. As of this year, the Indonesian stock market has fallen by 11%, second only to Thailand, becoming one of the worst performing major stock indexes in Asia.

Global investors are accelerating their withdrawal from the Indonesian market, with foreign capital having withdrawn nearly $1 billion from the Indonesian stock market since the beginning of this year.

The valuation of the Indonesian stock market continues to decline, and corporate profit growth is weak, leading to a decrease in price to earnings ratio and return on equity (ROE)—— Christopher Wood, Global Head of Equity Strategy at Jefferies

Weak economic growth exacerbates market concerns

The sluggish economic growth in Indonesia is also an important reason for the sustained market downturn. The unexpected interest rate cut by the Indonesian central bank in January has dampened market confidence in the economic outlook, further putting pressure on the Indonesian rupiah.

Investors are concerned that weak domestic growth, foreign capital outflows, and global trade uncertainty will continue to drag down Indonesia's asset performance.

In the future, the market will pay attention to whether the Indonesian central bank will take further measures, such as raising interest rates or strengthening market intervention, to stabilize the exchange rate and market confidence.

Editor's viewpoint:

The Indonesian market is currently affected by multiple factors and is difficult to recover quickly in the short term. Despite the Indonesian central bank's commitment to intervene, the continued withdrawal of foreign investment, slowing economic growth, and global trade uncertainty will still pose challenges to the market

In the future, if the Federal Reserve clarifies the path of interest rate cuts or the Trump administration adjusts tariff policies, the Indonesian market may usher in a certain breathing space.