Rupiah Weakens Ahead of Market Reopen

The Indonesian rupiah slipped toward IDR 16,920 per dollar on Tuesday, after briefly touching 16,860 in the prior session, as the dollar index strengthened amid heightened Middle East tensions. Domestically, markets will reopen on Wednesday after the Eid holidays, with sentiment seen staying cautious. As a net oil and gas importer, Indonesia remains exposed to rising energy costs. While authorities have pledged to keep subsidized fuel prices unchanged through the festive period, persistently elevated oil prices could eventually force policy adjustments. Inflation climbed to 4.76% in February, a near three-year high and above Bank Indonesia’s 1-1/2%–3-1/2% target range. Still, losses were capped by upcoming measures to curb speculation in the currency, due to take effect on April 1. Last week, the central bank held its benchmark rate at 4.75% for a sixth straight meeting, dropping earlier hints of easing and signaling a more cautious policy stance.

The Indonesian rupiah remained soft, hovering near IDR 17,000 per dollar on Thursday in low-volume holiday trading. At the same time, the dollar index held firm after the U.S. Fed indicated rates would stay steady until inflation shows clearer signs of easing. Domestically, Bank Indonesia’s latest policy statement dropped earlier language about creating room to cut borrowing costs, reflecting a more cautious stance. Meanwhile, rising energy prices have heightened concerns of an inflation shock, particularly for Indonesia, which relies heavily on imported Middle Eastern oil and has limited buffers against supply disruptions. Inflation accelerated to 4.76% in February, a near three-year high and above the central bank’s 1-1/2%–3-1/2% target range. The rupiah has fallen about 1.8% so far this year, despite BI holding rates steady since last October. Policymakers have also announced new measures to curb speculative activity in the currency, set to take effect in April.

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.