Rupiah Strengthens as Bank Indonesia Targets Speculation

The Indonesian rupiah firmed to around IDR 16,925 on Wednesday in thin holiday trade, rebounding from recent weakness as the dollar index softened ahead of the U.S. Fed’s rate decision and its first 2026 economic projections later today. Locally, Bank Indonesia Tuesday unveiled new measures to curb speculative activity in local currency, effective April, while keeping its benchmark rate unchanged at 4.75% for a sixth straight month. Notably, the board dropped earlier language about creating room to ease borrowing costs. Under the new rules, foreign-currency purchases above USD 50,000 per party per month will require supporting documents to ensure genuine demand. Meanwhile, the threshold for domestic non-deliverable forward sales will be doubled to USD 10 million per transaction, with similar increases for swaps. Governor Perry Warjiyo said the central bank will continue to optimize its policy mix to safeguard external resilience and maintain rupiah stability amid global uncertainty.

The Indonesian rupiah traded around IDR 16,975 per dollar on Tuesday afternoon, after briefly touching an intraday low of 17,000. The move followed Bank Indonesia’s decision to keep its key rate unchanged at 4.75%, in line with consensus, as the Middle East conflict heightens risks to the outlook. Rising energy prices have fueled concerns about a potential inflation shock, particularly for Indonesia, which relies heavily on imported Middle Eastern oil and has limited buffers against supply disruptions. Governor Perry Warjiyo said the rate hold reflects efforts to support the rupiah and keep inflation within target, noting the conflict has already pressured the currency. He added that the central bank has stepped up forex intervention to curb volatility, both in spot and forward markets. Warjiyo kept the 2026 growth outlook at 4.9%–5.7% and expects Q1 GDP growth to improve from the prior quarter. Globally, the dollar index held firm near 99.9 ahead of the upcoming Fed’s rate decision.

The Indonesian rupiah edged closer to IDR 17,000 per dollar on Tuesday, declining for a sixth session as the U.S. dollar stayed firm amid elevated global energy prices before the Fed’s policy decision. Indonesia remains vulnerable to higher energy costs as a net oil and gas importer, though authorities have pledged to keep subsidized fuel prices unchanged through the Eid holiday. Persistently high oil prices, however, could force adjustments later. Inflation in February hit a near three-year high of 4.76%, above Bank Indonesia’s target, driven largely by base effects from last year’s electricity tariff discounts. The central bank is set to announce its policy decision later today, with markets expecting a sixth consecutive rate hold. Still, speculation over further easing lingers after a total of 150bps of cuts since September 2024, aimed at supporting growth following disruptions in Sumatra. The economy grew 5.11% in 2025, below the 5.2% target, with 2026 growth projected at 5.4%.