Rupiah Remains Fragile as External and Fiscal Risks Mount

The Indonesian rupiah traded around IDR 17,070 per dollar on Thursday, holding above the key 17,000 level for a fourth straight session after recently touching a record low of about 17,100. The local currency stayed under pressure from a firm dollar index, as a vulnerable ceasefire between the U.S. and Iran kept global sentiment cautious. Meanwhile, concerns over Indonesia’s resilience to external shocks persisted. March forex reserves fell to their lowest in nearly two years, and February’s trade surplus narrowed, signaling weaker external buffers. At the same time, exposure to volatile global oil prices continues to pose risks to fiscal stability. While the government said it has room to manage higher energy costs, President Prabowo’s administration is reportedly recalibrating policies amid rising inflation and supply concerns. Meantime, the central bank maintained its focus on smoothing volatility rather than defending a specific exchange rate level with all available policy tools.

The Indonesian rupiah hovered near IDR 17,020 per dollar on Wednesday, after briefly sliding to a record low of around IDR 17,100 in the prior session. Sentiment remained fragile, with a sharp pullback in the dollar index offering only limited relief after U.S. President Trump decided to delay a potential strike on Iran by two weeks. Locally, Indonesia remains exposed to global oil price swings, which continue to pose fiscal risks. External cushions also weakened, with March forex reserves falling to their lowest in nearly two years, capping the country’s ability to absorb external shocks. Still, Jakarta insisted it retains fiscal space, citing a “buffer” to manage rising energy costs. Meanwhile, Bank Indonesia reaffirmed that stabilizing the rupiah and curbing excessive volatility is its top priority, adding that it has deployed interventions and stands ready to use all available policy tools. The central bank added that the currency’s weakness is largely driven by global factors.

The Indonesian rupiah slid to a record low of around IDR 17,080 per dollar on Tuesday, extending its downtrend as the dollar index firmed. Pressure mounted amid escalating Middle East tensions, with President Trump setting a deadline for Iran to strike a deal or face possible attacks. Bets that the U.S. Fed will hold rates steady this month further buoyed the greenback. Locally, surging oil prices and geopolitical risks stoked inflation concerns and strained fiscal conditions, notably under President Prabowo’s flagship program, weighing on the current account. External buffers weakened as February’s trade surplus narrowed on softer exports and higher imports, while forex reserves fell to a three-month low in February. Capping losses, Bank Indonesia confirmed intervention in spot and non-delivery forward markets to support the currency. Meantime, the government pledged to maintain fuel subsidies and cap the fiscal deficit at 3% of GDP this year, assuming oil averages USD 100 per barrel.