Indonesia's central bank raised interest rates sharply, and the president promised fresh steps to rescue the rupiah after a plunge in the country's stocks and currency today.
Indonesia's central bank raised its target for key one-month interest rates by 0.75 per cent to 9.5 per cent and required banks to hold more money at the central bank, a form of monetary tightening.
At one point today the currency had fallen 9 per cent. The rupiah recovered after the central bank intervened to buy it, and then held steady after the interest rate move.
Minutes after opening, the Jakarta Composite Index sank 4 per cent after falling 5.2 per cent yesterday - its biggest percentage drop since May 2004.
The market mayhem is proving to be the sternest economic test yet for President Susilo Bambang Yudhoyono as he faces increasing calls to raise politically sensitive fuel prices.
Mr Yudhoyono said the latest market turmoil was not the same as the 1997-98 Asian financial crisis. But he said "significant" measures were needed to support the currency, which he hoped to announce tomorrow.
Record oil prices of $70 a barrel have taken a heavy toll on Indonesia as it needs to buy dollars to pay for oil imports and this has raised fears of a balance of payments crisis. The government has been hesitant to cut a bloated fuel subsidy bill.