Rupiah Nears 17,000 as Strong Dollar, Oil Risks Weigh

The Indonesian rupiah weakened toward IDR 17,000 per dollar on Monday, reversing gains from the previous two sessions, as the U.S. dollar index held firm amid the protracted Middle East conflict. Caution also prevailed ahead of key domestic releases next week, including March inflation and February trade data. Headline inflation accelerated to 4.76% yoy in February, breaching Bank Indonesia’s target ceiling of between 1-1/2% to 3-1/2%. Recent negative outlook revisions from Moody’s and Fitch have amplified downgrade risks. The government reiterated it has no intention of breaching the 3% budget deficit cap, although persistently elevated oil prices could test this stance and prompt policy adjustments. Further, uncertainty lingers over whether new central bank measures, effective April 1, will effectively curb rupiah speculation and stabilize the currency. As a net oil and gas importer, Indonesia remains vulnerable to rising global energy costs, which continue to weigh on the rupiah.

The Indonesian rupiah slipped toward IDR 16,950 per dollar on Friday, extending losses for a second straight session as a firm dollar index underscored ongoing geopolitical risks from the Middle East conflict and its potential impact on oil, inflation, and global growth. Sentiment was also cautious ahead of key domestic releases next week, including March inflation and February trade data. Inflation quickened to 4.76% in February, a near three-year high and above Bank Indonesia’s 1-1/2% to 3-1/2% target range. Meanwhile, January imports surged ahead of Ramadan and Eid al-Fitr, straining the trade balance. As a net oil and gas importer, Indonesia remains exposed to rising energy costs. Still, the rupiah booked its first weekly gain in four weeks, up around 0.2%, lifted by confidence in fiscal buffers to absorb near-term shocks. Officials stressed no immediate changes to fuel prices or subsidy policies, while Bank Indonesia prepares new measures from April 1st to curb rupiah speculation.

The Indonesian rupiah held near IDR 16,900 per dollar on Thursday, little changed from the prior session, as traders awaited key data next week, including March inflation and February trade figures. Inflation rose to 4.76% in February, a near three-year high and above Bank Indonesia’s target, while January’s imports surged ahead of Ramadan and Eid al-Fitr, weighing on the trade balance. Currency stability remains a priority, with Bank Indonesia reaffirming intervention and tighter regulations to manage capital flows and curb volatility. From April 1, forex purchases above USD 50,000 will require documentation, while domestic NDF sales limits will be doubled to USD 10 million to deter speculation. These steps follow last week’s move to hold rates at 4.75% for a sixth straight meeting after 150bps of cuts since September 2024. Jakarta also pledged to keep the budget deficit within 3%. Globally, the dollar index remained firm around 99.6, amid uncertainty over efforts to end the Iran war.