Indonesian financial markets are expected to face renewed volatility following the unexpected removal of Finance Minister Sri Mulyani Indrawati, raising concerns about potential central bank intervention, Bloomberg reports.
The rupiah is set to weaken when onshore trading resumes, after currency forwards fell more than 1% against the dollar overnight to the weakest level since May. Indonesian dollar-denominated bonds also trended lower, while two U.S.-listed exchange-traded funds tracking Indonesian equities fell, suggesting local stocks may open lower.
Indrawati’s departure amplifies investor anxiety over potential populist policies under President Prabowo Subianto, coming just days after the country experienced its most severe anti-government protests in years. New Finance Minister Purbaya Yudhi Sadewa has pledged to maintain fiscal discipline, but Indrawati had enjoyed widespread respect among global investors.
Carl Vermassen, a portfolio manager at Vontobel Asset Management AG, said, “It’s not entirely what we like” and noted that concerns over central bank independence could motivate investors to reduce risk.
The rupiah has already declined more than 1% against the dollar this year, making it the worst-performing currency in Asia after the Indian rupee. The Jakarta Composite Index has gained 9.7% in 2025, underperforming other Asian emerging-market peers.
Bloomberg Economics highlighted that Indrawati’s removal “risks spooking investors just when trust is most needed — with the government and central bank embarking on a renewed burden-sharing arrangement that monetizes part of state spending. That initiative already had put policy on a slippery slope,” according to economist Tamara Mast Henderson.
Traders are now closely monitoring whether Bank Indonesia will intervene in currency and bond markets to maintain liquidity. Helmi Arman, an economist at Citigroup in Jakarta, said in a note to clients that the central bank is likely to focus on FX stabilization in the near term and is not expected to cut interest rates this month. He added that increased uncertainty could accelerate foreign portfolio outflows, which have already begun following the late-August social unrest.
