Rupiah Stays Under Pressure Despite Stabilisation Efforts

The rupiah slipped toward IDR 17,400 per dollar on Monday, extending losses for a third straight session and hovering near record lows as the U.S. dollar index firmed on concerns that U.S.-Iran peace talks could falter. Skepticism also lingered over Bank Indonesia’s ability to safeguard the currency despite measures to tighten forex rules, bolster liquidity, and enhance macroprudential coordination. Meantime, forex reserves fell for a fourth month in April to their lowest in nearly two years, underscoring fragile external buffers. Domestic sentiment added strain, with consumer sentiment stuck near a five-month low amid worries over jobs and incomes. Risks tied to Middle East tensions clouded the outlook through higher energy costs and supply chain disruptions, though April inflation stayed manageable. Pressure had already been mounting before the Gulf conflict escalated in late February, driven by fiscal vulnerabilities and persistent capital outflows from bonds and broader markets.

The rupiah weakened toward IDR 17,390 per dollar on Friday, extending prior losses, as the U.S. dollar firmed amid renewed hostilities between Washington and Tehran around the Strait of Hormuz. Pressure also mounted after April data showed Indonesia’s forex reserves fell for a fourth straight month to their lowest in nearly two years, underscoring fragile external buffers. Meanwhile, risks from Middle East tensions to energy costs and supply chains remain even as April inflation stayed manageable. Bank Indonesia’s interventions and tighter safeguards, including stricter oversight of corporates with heavy forex needs and lower caps on dollar purchases without documentation, helped steady the currency through the week. Even so, the rupiah has shed almost 4% year-to-date, ranking among Asia’s weakest. Strains had already been building before the Gulf conflict escalated in late February, as investors flagged fiscal vulnerabilities and transparency concerns in local capital markets.

The Indonesian rupiah hovered around IDR 17,360 per dollar on Thursday after briefly touching 17,425 in the previous session. The local currency found some support as the U.S. dollar slipped further on reports that Washington and Tehran are drafting a new proposal to end the Middle East conflict, easing haven demand. Locally, President Prabowo approved seven new Bank Indonesia measures to bolster the currency, including halving the cap on undocumented dollar cash buying to USD 25,000 and requiring resource exporters to place 50% of forex earnings in domestic banks from June 1. However, the rupiah has fallen almost 4% this year, with skepticism over policy effectiveness persisting even as the central bank has held rates steady since October. On the trade front, March’s surplus was not supported by export growth, but driven by falling imports. Shrinking forex reserves also weighed on sentiment, despite Governor Perry Warjiyo saying they remain sufficient to support stabilisation efforts.