Bank Indonesia Governor Perry Warjiyo stated that the rupiah exchange\nrate, currently holding at around 17,000 per US dollar, is undervalued.\nUndervalued refers to a situation where the currency\u2019s value is lower or\ncheaper than its fundamentals, particularly when economic performance\nremains strong.<\/p>\n
\u201cWe emphasise that the current rupiah exchange rate is undervalued\ncompared to its fundamentals,\u201d Perry said during a press conference\nfollowing the Board of Governors\u2019 meeting on Wednesday, 22 April\n2026.<\/p>\n
As of Monday morning, 27 April 2026, the rupiah was still hovering\nabove 17,200 per US dollar. Last week, it even plunged to 17,315,\nmarking an all-time low.<\/p>\n
So why is the rupiah experiencing undervaluation? Chief Economist at\nPermata Bank, Josua Pardede, explained that there is a wide gap between\nthe current market rate of the rupiah and its fair value based on\neconomic fundamentals.<\/p>\n
Josua measures the rupiah\u2019s fundamental value using fair value\nindicators. According to fair value calculations, 1 US dollar was around\nRp16,407 in March 2026. At that time, the rupiah\u2019s real effective\nexchange rate (REER) stood at 93.5. Thus, the rupiah was deemed 3.1%\ncheaper than its fair value, or about 500 points from the March average\nposition.<\/p>\n
However, with the rupiah now trading around 17,295\u201317,300 per US\ndollar, the gap against the fair value of Rp16,407 has widened to about\n5.4%, or roughly 890 per US dollar.<\/p>\n
Using a more conservative approach, Josua estimates the current\nfundamental value of the rupiah should be around 16,300\u201316,600 per US\ndollar. Thus, the distance between the actual rate and the current level\nhas reached 4\u20136%.<\/p>\n
Nevertheless, according to Josua, an undervalued rupiah does not\nautomatically lead to an easy strengthening. \u201cThe market is currently\nnot only assessing fundamentals but also risks,\u201d he said.<\/p>\n
The rupiah\u2019s weakening is due to a combination of high oil prices,\ntensions in the Middle East, domestic dollar needs for imports and\ndividend repatriation, as well as concerns over fiscal burdens from\nenergy subsidies. On Thursday last week, the rupiah fell above 17,300,\ncoinciding with persistently high global oil prices around US$104 per\nbarrel. This was accompanied by seasonal dollar demand and investor\nworries about the impact of oil prices on energy subsidies.<\/p>\n
According to Josua, Bank Indonesia\u2019s claim that the rupiah is\ncurrently undervalued is quite reasonable but must be read carefully.\nAlthough the rupiah appears too cheap in real terms, the market is still\npricing in significant risks. \u201cThe market is still demanding a large\nrisk premium before it is willing to bring the rupiah back to its\nfundamental range.\u201d<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/why-bi-considers-the-rupiah-exchange-rate-undervalued-1777279892", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }