• Indonesian Rupiah struggles due to fiscal worries from higher oil import costs and BI growth trade-offs.
• Indonesia’s new measures target stock manipulation after MSCI warned of potential standalone market demotion.
• Fed rate pause expectations and reduced immediate geopolitical safe-haven demand restrain further US Dollar gains.

USD/IDR gains ground for the fourth successive day, trading around 18,150 during Asian hours on Monday. The pair appreciates as the Indonesian Rupiah (IDR) faces challenges due to fiscal concerns that persist amid higher oil prices, given Indonesia’s status as a net oil importer. Concerns also grew that Bank Indonesia (BI) may face a difficult trade-off between defending the currency and supporting near-term growth.

Indonesia on Monday introduced more measures to address stock market manipulation, including adding independent parties ​to a committee determining stocks with concentrated ownership structures, after MSCI said the country could be demoted due to ‌concerns about opaque trading. The measures came after MSCI announced earlier this month that it could demote Indonesia’s stock exchange to “standalone” market status, saying not enough had been done to arrest coordinated trading practices in its stock market.

Indonesia eases reserve requirements to bolster liquidity

Analysts at MUFG highlight that alongside its latest policy decision, Bank Indonesia moved to inject more domestic liquidity by announcing a phased reduction in banks’ reserve requirement ratios. They note that “for conventional banks, the reserve requirement ratio will fall from 9% to 8% on 1 November and further to 7% on 1 December,” while “for sharia banks, the reserve requirement ratio will decline from 7.5% to 6.5% and subsequently to 5.5%.” MUFG interprets these steps as a targeted easing of funding conditions designed to complement BI’s broader policy mix without undermining its currency-support objectives.

However, the upside of the USD/IDR pair could be restrained as the US Dollar (USD) may face challenges on market expectations that the Federal Reserve (Fed) will hold interest rates steady in October before potentially pursuing another rate hike in December. According to the CME FedWatch Tool, markets are currently pricing in a 90.6% probability of a rate pause at the October 27–28 policy meeting, alongside a 79.7% chance of a hike in December.

Moreover, the Greenback struggles due to easing safe-haven demand, driven by US President Donald Trump ruled out immediate military action against Iran, stating, “there will not be a strike today,” according to Al Jazeera. However, market anxiety persists over the possibility of strikes resuming after this week’s Israeli elections and next week’s US midterm elections, with reports indicating Iran is prepared to retaliate by targeting Israel and the UAE.

Safe-haven flows fragment as different risks drive different havens

Strategists at OCBC observe that “safe-haven demand is intensifying, but the beneficiaries differ by risk,” encapsulating their theme of “different shocks, different havens.” They note that AI-related growth concerns are channelling flows into the Japanese Yen, Middle East tensions are underpinning the Canadian Dollar and NOK, while French fiscal stress is lending support to the Swiss Franc, underscoring how the nature of each shock is now determining which haven investors reach for.