Barclays sees Indonesia rupiah stabilization after recent weakness

Barclays expects the Indonesian rupiah to stabilize in the near term after recent weakness driven by negative seasonality, a stronger U.S. dollar, and one-way bearish sentiment. The bank said Bank Indonesia’s 100 basis points of additional tightening, along with steps to reduce FX swap hedging costs and lift yields, should help support the currency and reinforce the central bank’s credibility. The article also notes that seasonal dollar demand from the Hajj pilgrimage, MSCI rebalancing, and second-quarter dividend payments are fading, which could ease pressure on the rupiah. Markets will watch late-June and early-July deliverable NDF maturities and any potential S&P credit rating action, though Barclays expects any reaction to be asymmetric. Medium-term rupiah performance will likely depend on policy credibility, government initiatives around strategic resources, and whether capital inflows resume.