Rupiah Firms Further on Weaker Dollar and Stronger FDI

The rupiah strengthened to around IDR 17,230 per dollar on Monday, extending gains for a second session after recently touching a record low near 17,330. A softer U.S. dollar supported sentiment, as reports of Tehran’s new proposal to Washington on reopening the Strait of Hormuz eased geopolitical risks. Locally, Bank Indonesia last week kept its key rate at 4.75%, maintaining a pause since October and signaling confidence that its mix of forex intervention and macroprudential tools is sufficient to guard the currency. Governor Warjiyo also noted the rupiah is undervalued relative to fundamentals, suggesting scope for appreciation. Fresh data showed Q1 FDI rose 8.5% yoy, up from the prior 4.3% on enhanced inflows into downstream industries. However, gains were capped by caution ahead of inflation and trade releases this week. March CPI eased to 3.48%, but upside risks linger with higher oil prices. Meanwhile, February’s trade surplus undershot forecasts amid a surge in imports.

The Indonesian rupiah firmed to around IDR 17,290 per dollar on Friday, inching up from a record low near 17,330 in the prior session. However, sentiment remained fragile as broad U.S. dollar strength, fueled by haven demand amid stalled U.S.–Iran peace efforts, continued to pressure emerging market currencies. Earlier this week, Bank Indonesia left interest rates unchanged for a seventh straight meeting, as expected. Governor Perry Warjiyo also pledged to step up onshore and offshore interventions, stressing the rupiah is undervalued relative to fundamentals. He noted foreign reserves of about USD 148 billion in March provided a sufficient buffer against external shocks. Yet the currency has repeatedly hit record lows this month and is on track for a fourth straight weekly fall. Still, modest net capital inflows into government bonds at the start of Q2 offered early signs of stabilization, with investors awaiting Q1 foreign direct investment data due next week for further direction.

The Indonesian rupiah slipped toward a new low of around IDR 17,290 per dollar on Thursday, marking a third session of losses amid a firmer U.S. dollar that drew support from haven demand following stalled U.S.–Iran peace efforts. Wednesday's move by Bank Indonesia to keep interest rates unchanged for a seventh straight meeting offered little support, as the currency repeatedly hit record lows this month. Pressure has been exacerbated by Indonesia’s reliance on imported energy, despite recent hikes in non-subsidized fuel prices. Governor Perry Warjiyo warned higher oil prices could widen the current account deficit to 0.5%–1.3% of GDP, up from an earlier estimate of 0.1%–0.9%. In response, Bank Indonesia has stepped up intervention, pushing forex reserves to a two-year low while lifting bond yields to attract inflows. However, sentiment remains vulnerable, as fiscal concerns surrounding President Prabowo’s key programs add to broader risk-off sentiment tied to the Middle East conflict.