• Jakarta stock index drops more than 2%
• Rupiah falls nearly 1%, central bank steps in
• Students and workers protest lawmakers' pay, education funding

JAKARTA, Aug 29 (Reuters) - A steep selloff in Indonesia's stocks and currency on Friday prompted regulators to step in to calm the markets following several days of student protests that have stung investor sentiment.

Indonesia's central bank said on Friday it would remain active in the foreign exchange market to stabilise the rupiah, while the stock exchange regulator said market fundamentals remained strong despite a sudden fall in prices.

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The rupiah dropped nearly 1% to its weakest level since August 1, before regaining some of the losses, and was last at 16,475 per dollar. The stock index (.JKSE) , opens new tab fell more than 2% to its lowest in over two weeks.

Indonesian students said they would protest at Jakarta's police headquarters on Friday after a motorcycle rider died when he was hit by a police vehicle during violent clashes following a demonstration outside the parliament the day before.

Students and workers have been protesting this week on a number of issues including lawmakers' pay, education funding and the government's school meals programme.

DBS senior economist Radhika Rao said the escalating street protests in the capital have hurt rupiah assets as investors weigh the risk of broader unrest and policy uncertainty.

"The central bank showed their hand to arrest volatility in the domestic markets, especially the currency, which weakened sharply, bucking the regional trend," Rao said.

Heavy selling of the rupiah by foreign investors had caused dollar/rupiah non-deliverable forward (NDF) rates to spike, signalling expectations of further rupiah depreciation, a trader said.

Bank Indonesia (BI) will continue to take action to stabilise the rupiah by intervening in offshore and onshore non-deliverable forward markets and the spot market, said Erwin Gunawan Hutapea, the head of the bank's monetary department.

It will also continue buying government bonds on the secondary market, he told Reuters.

In response to the steep drop in the stock market, the director of Indonesia's stock exchange regulator, Jeffrey Hendrik, told Reuters that market fundamentals remained strong and technical corrections are normal.

Indonesian stocks have been on a tear recently and struck a record high on Thursday but were last down 2.27% on Friday afternoon. The benchmark index is still up 3.8% this month.

"We think the recovery of Indonesian equities and bonds would remain on track, despite the increased volatility in Indonesia's markets," said Daniel Tan, portfolio manager at Singapore-based Grasshopper Asset Management.

https://www.reuters.com/world/asia-pacific/indonesia-stocks-rupiah-dive-political-unrest-jolts-investors-2025-08-29/