FX.co ★ Rupiah Under Pressure on MSCI Downgrade Threat

The Indonesian rupiah weakened beyond IDR 18,050 per U.S. dollar on Friday, its lowest level since early August, after MSCI raised doubts over Indonesia’s classification as an emerging market. The index provider cited dysfunction in the local equity market and signaled that Indonesia could potentially be downgraded to standalone-market status, a move that could trigger substantial capital outflows. This prospect added to the pressure on the rupiah amid ongoing market volatility.

Looking ahead, Bank Indonesia is set to hold its policy meeting next week. The central bank has kept its benchmark interest rate unchanged at 5.75% for three consecutive months through September, after cumulative increases of 100 basis points in May and June, while maintaining foreign-exchange interventions to stabilize the rupiah. Inflation accelerated to 3.28% in September, largely due to persistent food price pressures.

On the global front, the U.S. dollar index eased but remained relatively firm near 102, as resilient U.S. economic data bolstered expectations of further monetary tightening by the Federal Reserve. For the week, the rupiah declined about 0.4%, erasing gains recorded over the previous two weeks.