Rupiah Slips Further on Policy Doubts, Falling Exports

The Indonesian rupiah slipped toward IDR 17,800 per US dollar in late May, approaching a fresh record low, pressured by broad strength in the US dollar index amid growing inflation risks linked to Middle East uncertainty. Locally, worries over Indonesia’s external balance deepened after Q1 current account deficit hit the largest in over six years. Markets also braced for key data due next week, including May inflation and April trade. While April inflation remained mild, risks of renewed price pressures have built amid escalating geopolitical tensions. Meantime, March’s trade surplus was driven by weaker imports rather than export strength, underscoring fragility. Traders assessed new rules requiring export proceeds to stay in the domestic financial system, a measure seen as offering some support for the rupiah. The currency has fallen about 6.4% ytd, among Asia’s worst performers alongside the Indian rupee and Philippine peso.

The Indonesian rupiah hovered around IDR 17,720 per U.S. dollar on Monday, extending losses for a third session despite the dollar index easing from six-week highs. Hopes for a U.S.–Iran deal tempered oil-driven inflation risks and reduced expectations of further Fed hikes, weighing on the safe-haven dollar. Sentiment toward Indonesian assets stayed precarious amid persistent global headwinds, including rising U.S. yields, elevated crude prices, and unabating capital outflows. Locally, pressure lingered after the current account deficit in Q1 2026 widened to the deepest in over six years, underscoring external balance concerns. Markets largely dismissed Finance Minister Purbaya Yudhi’s remarks that the rupiah could strengthen sharply to around IDR 15,000 under new rules requiring resource exporters to retain proceeds in local banks for at least 12 months. Year-to-date, the rupiah has fallen about 6.1% against the dollar, ranking among Asia’s worst performers alongside the Indian rupee.

The Indonesian rupiah extended its losses on Friday, slipping past IDR 17,700 per U.S. dollar as the dollar index held near a six-week high amid elevated oil prices, sticky U.S. inflation, and rising Treasury yields. Domestic data further pressured sentiment, with the current account deficit widening to its deepest level in more than six years, underscoring concerns over Indonesia’s external balance. Pressure on the local currency has intensified since April, due to capital outflows, fiscal strains, and inflation risks tied to Middle East tensions. Bank Indonesia’s larger-than-expected rate hike earlier this week provided little relief, after policymakers warned that higher energy costs still threaten the rupiah. Meanwhile, forex reserves have dropped about USD 10 billion this year through April on continued intervention. The rupiah is set for an eighth weekly drop, down 1.4% so far and near 6% ytd, though the central bank expects stabilisation by mid-year as seasonal pressures ease.