A Round of Applause! Rupiah Surges, August Gains Strongest in 15 Months
The rupiah exchange rate successfully concluded the August 2026 trading period with a solid appreciation. The ‘Garuda’ currency closed the final trading session of August on Monday (31/8/2026) at the level of Rp17,710/US$. On a monthly basis, the rupiah appreciated by 1.56% against the US dollar.
This strengthening marks the rupiah’s first monthly appreciation since February 2026. August’s performance also represents the strongest monthly gain since May 2025, when the rupiah strengthened by 1.87%.
The movement of the rupiah throughout August was influenced by various global and domestic factors and sentiments that supported the exchange rate’s appreciation. CNBC Indonesia summarises the key factors that drove the rupiah throughout August 2026.
US Dollar Weakens, Providing Room for Rupiah to Strengthen
The primary factor supporting the rupiah throughout August was the weakening of the US Dollar Index (DXY). Over the past month, the DXY was recorded to have weakened by 0.49%.
The weakening of the US dollar reduced pressure on emerging market currencies. This condition provided space for the rupiah to move more strongly after previously facing pressure around the Rp1_000/US$ level.
Pressure on the US dollar emerged after market expectations for a US central bank (The Federal Reserve/The Fed) interest rate hike began to decline. The trigger was US labour market data, which proved to be much weaker than anticipated. The US Department of Labour reported that non-farm payrolls for July 2026 fell by 23,000 jobs, far from economists’ forecasts of an 80,000 increase. Data for May and June were also revised downwards by 103,000 jobs.
This weak labour data caused the market to slash expectations for a Fed rate hike. The probability of an interest rate hike in September dropped to 44%, down from 57% before the labour data was released.
US Fiscal Concerns and Treasury Buybacks Stir Market Anxiety
Another sentiment weighing on the US dollar came from the US government bond market. On Wednesday (19/8/2026) local time, the US Treasury announced plans to double the buyback of long-term US government bonds.
This policy emerged following volatility in Treasury yields. The 30-year US government bond yield briefly surged to 5.337%, the highest level in 19 years, amid market concerns regarding US fiscal conditions. The implementation of increased buybacks will be carried out gradually in the following quarter, with the value of long-term bond buybacks doubled to US$4 billion per operation.
Market anxiety grew as US government debt surpassed US$40 trillion for the first time. This situation led the market to closely scrutinise the scale of US government financing needs, the fiscal deficit, and the sustainability of the nation’s debt. While the bond buyback step was intended to help dampen pressure in the bond market, the market also viewed the policy as a signal that the US government is beginning to use a more direct approach to curb rising borrowing costs. This subsequently raised new concerns regarding US assets, which pressured the US dollar and supported the rupiah’s strength.
Middle East Tensions Ease, but Warsh’s Speech Hinders Dollar Weakness
Geopolitical dynamics also influenced US dollar movements throughout August. During certain periods, tensions between the US and Iran appeared flatter than in the previous month. Hopes for a diplomatic path emerged, reducing market interest in the US dollar as a safe-haven asset. As the demand for safe-haven assets decreased, the US dollar tended to lose some of its appeal, providing space for Asian currencies, including the rupiah, to move more positively.
However, the US dollar’s weakness did not proceed smoothly until the end of the month. Towards the close of August, the greenback received a boost from a speech by Fed Chair Kevin Warsh at the Jackson Hole symposium on Friday (28/8/2026). Warsh stated that the Fed is still closely monitoring US inflation, which has not yet fully moved towards the 2% target. This statement reopened the possibility that the Fed could still raise interest rates if inflationary pressures do not subside.
The market responded immediately. The probability of a 25 basis point Fed rate hike in September rose from approximately 35% before the speech to around 50%. While these rising expectations strengthened the US dollar towards the end of August, the DXY remained weaker on a monthly basis, and the rupiah still managed to record gains.
Rupiah Also Supported by Domestic Sentiment
In addition to global factors, the rupiah also received support from several domestic sentiments. One of the most closely watched by the market was the certainty regarding the leadership direction of Bank Indonesia. Previously, the market closely monitored the dynamics at BI after Perry Warjiyo resigned from the position of BI Governor on 25 July 2026.
Uncertainty began to subside after Destry Damayanti was appointed as the Acting (Pjs) Governor of BI on 26 July 2026. Certainty strengthened further when President Prabowo Subianto submitted Destry’s name as the sole candidate for BI Governor on 10 August 2026. Destry subsequently underwent a fit and proper test at Commission XI of the DPR on Wednesday (26/8/2026). On the same day, Commission XI also held a fit and proper test for Aida S. Budiman as a candidate for Senior Deputy Governor of BI.
The selection process continued on Thursday (27/8/2026) for two BI Deputy Governor candidates, namely Solikin M. Juhro and M. Anwar Bashori. On Thursday afternoon, Commission XI of the DPR approved Destry as the elected Governor of BI for the 2026-2031 period. The results of this process received a positive response from the market, as certainty regarding the BI Governor candidate was deemed crucial.