<2> Indonesia’s Fix for Market Turmoil May Be Turning Off Investors
<3> A Crisis of Confidence
Indonesia’s efforts to stabilize its currency and calm market turmoil may be having an unintended consequence: scaring off investors. The country’s central bank, Bank Indonesia, has been intervening in the foreign exchange market to prop up the rupiah, which has been under pressure due to concerns about the country’s economic fundamentals.
<4> A Look at the Data
According to data from Bloomberg, the rupiah has strengthened against the US dollar in recent weeks, rising to a 20-month high of 14,500 per dollar. However, this strength has come at a cost: foreign investors have been pulling out of the country’s stock market and bond market.
<5> The Impact on Investors
The data from Reuters shows that foreign investors have been net sellers of Indonesian stocks and bonds in recent months, with a net outflow of $1.3 billion in January alone. This is a worrying trend for Indonesia, as foreign investors are a crucial source of capital for the country’s economy.
<6> The Role of the Central Bank
Bank Indonesia has been intervening in the foreign exchange market to prop up the rupiah, but this has