Rupiah Under Strains, Poised for Third Weekly Drop

The Indonesian rupiah slid to a fresh low of around IDR 17,180 per dollar on Friday, extending its recent fall even as the U.S. dollar index fell further amid easing US–Iran tensions. The divergence highlighted persistent domestic pressures, with markets largely dismissing Bank Indonesia’s assurance to deploy all tools to defend the currency in a measured and timely manner. Ongoing capital outflows, elevated oil prices, and seasonal dividend repatriation continued to weigh on sentiment, while concerns over fiscal expansion added to downside risks, ahead of next week’s policy meeting. Bank Indonesia kept its key rate in March for a sixth straight time, after a total of 150bp cuts since September 2024. The rupiah is set for a third weekly loss, pressured by thin forex reserves and a weaker growth outlook after the IMF cut Indonesia’s 2026 forecast. Rising energy costs and fiscal burdens also lift inflation risks, potentially capping policy flexibility, despite CPI staying within target.

The Indonesian rupiah remained near a record low of IDR 17,130 per dollar on Thursday, even as the U.S. dollar index hovered near a six-week low amid hopes for a Middle East truce. The local currency faced pressure from multiple headwinds, including elevated oil prices, persistent capital outflows, fragile domestic fundamentals, and seasonal dividend repatriation. These factors are likely to keep the central bank active in the market, potentially further straining forex reserves, which already fell to a near two-year low in March. Meanwhile, the IMF cut Indonesia’s 2026 growth forecast to 5.0% from 5.1%, citing global uncertainty. Inflation risks are tilted to the upside, driven by volatile energy prices and rising fiscal burdens linked to several key programs, despite March CPI within the central bank’s target. Bank Indonesia is set to hold a policy meeting next week after leaving rates unchanged in March for a sixth straight time, following a total of 150bp cuts since September 2024.

The Indonesian rupiah hovered near a record low of IDR 17,130 per dollar on Wednesday, even as the U.S. dollar index remained at a six-week low amid easing safe-haven demand on hopes for a diplomatic resolution to the Middle East conflict. Weakness in local currency reflected persistent capital outflows and fragile domestic fundamentals, keeping sentiment subdued ahead of next week’s monetary policy meeting. In March, Bank Indonesia held its benchmark rate at 4.75% for a sixth straight meeting, following a cumulative 150bp of reduction since September 2024. While current inflation remained within the central bank’s target range, risks are tilted to the upside due to volatile oil prices and rising fiscal pressures linked to President Prabowo’s key programs. Policymakers have signaled limited room for further easing, with Governor Perry Warjiyo stressing a shift toward safeguarding stability through measured and consistent intervention in both spot and non-deliverable forward markets.