Indonesian Rupiah's Value Hinges on Bond Market Performance, Says Economist

Indonesia's currency, the rupiah, needs a significant boost in foreign capital to stabilize, according to Fakhrul Fulvian, Chief Economist at Trimegah Sekuritas Indonesia. He identifies the bond market as the primary determinant of the rupiah's trajectory, serving as the main entry point for foreign portfolio investment.

While foreign investors have begun repurchasing Indonesian bonds, Fulvian notes this is just the initial phase. For sustained capital flow, Indonesia's bond market must offer yields competitive enough to offset the elevated global risks. He commends Bank Indonesia's tightening of liquidity management, evidenced by three rate hikes to 5.75 percent, as a solid foundation.

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Foreign investors are indeed starting to buy Indonesian bonds again, but in my opinion, the process is still in its early stages.

However, Fulvian stresses that successful stabilization hinges on consistent policy from both Bank Indonesia and the Ministry of Finance. The next challenge, he explains, is not merely halting pressure on the rupiah but instilling investor confidence that the bond market's normalization will proceed consistently, re-establishing Indonesia as a prime destination for portfolio investment in the region.

Recent data from Bank Rakyat Indonesia (BRI) indicates foreign capital inflows of Rp 70.39 trillion in June 2026, partly due to rising yields on Bank Indonesia Rupiah Securities (SRBI). Inflows into government bonds (SBN) reached Rp 21.03 trillion. Despite this, the bid-to-cover ratios for both SBN and SRBI in June fell below their 2025 historical averages, suggesting aggregate investor demand for domestic financial assets remains relatively limited.

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The next challenge is not to stop the pressure on the rupiah, but to build investor confidence that the normalization process of the bond market will be carried out consistently until Indonesia becomes one of the main destinations for portfolio investment in the region again.