Indonesia Rupiah Hits New Low Amid Thin Trading

The Indonesian rupiah weakened to a fresh record low of near IDR 17,900 per U.S. dollar in thin holiday trading on Thursday, extending losses for a sixth straight session. The decline came as the U.S. dollar index rose toward a seven-week high after reports of new U.S. strikes on an Iranian military site dimmed prospects for a peace deal, stoking inflation fears and global rate concerns. Caution also emerged ahead of next week’s release of May inflation and April trade data. While April inflation stayed contained, rising energy costs threaten renewed price pressures. Trade momentum remains fragile, with March exports falling and imports sluggish. The rupiah is set for a ninth straight weekly decline, down about 0.4% this week so far and 6.4% year-to-date, ranking among Asia’s weakest alongside the Indian rupee and Philippine peso. Persistent fiscal strains and lingering capital outflows continue to weigh, despite Bank Indonesia’s larger-than-expected rate hike in mid-May.

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.