"If we look at the turmoil in the past two days, the rupiah is already improving and the financial markets too ... If this is maintained, we hope our interest rate can be lowered," Dody Budi Waluyo, a member of Bank of Indonesia's board of governors, told Reuters in an interview.

Last month, the bank trimmed its key policy rate by 25 basis points (bps) to 5.75pc to support economic growth, the first reduction in nearly two years and ahead of the US Federal Reserve's July rate cut.

Markets went into a tailspin on Monday after China let its currency weaken beyond 7 yuan per dollar, a surprise move that investors took as retaliation for US President Donald Trump's announcement of more tariffs on Chinese imports.