I suggest there are several factors weighing on many emerging market currencies, including the rupiah. These include Fed policy, whose tightening course which was reaffirmed a week ago, the underlying strength of the US dollar, not totally unrelated to Fed policy, and the sharp rally in oil prices. Indonesia has been hit be a devasting earthquake and tsunami, which, in addition to the human tragedy, presents additional economic challenges. Since May, the central bank has hiked rates five times, including a 25 bp hike last week, but has proven insufficient to stem the tide, and the market has begun pricing in the next hike too. Although Indonesia is an oil producer, it does not produce enough for domestic demand and must also import oil now. Indonesia’s current account deficit is expected to rise this year, back above 2% for the first time since 2015.
Indonesia is trying to devise other means of supporting the currency. For example, it has introduced a non-deliverable domestic forward that ostensibly could be used as a hedging tool for businesses without exerting more pressure on the rupiah. There are also some measures under consideration that may encourage exporters to convert their dollar holdings into rupiah.
The April 2019 election seems too far off to be a key factor for investors. In the aftermath of the natural disaster, the campaigns were suspended. Still, the latest polls show President Widodo with a comfortable lead. For the first time, both the president and parliament will be elected on the same day.