Analysts: Room for Rupiah Strengthening Remains Narrow Amid Market Sensitivity
Jakarta — The Indonesian rupiah opened trading in Jakarta on Tuesday, appreciating by 63 points or 0.37 per cent to Rp16,886 per US dollar, up from the previous close of Rp16,949 per dollar.
Josua Pardede, Chief Economist at Permata Bank, stated that room for rupiah strengthening remains narrow as markets will be highly sensitive to news from the Middle East and oil price movements.
“For today’s trading, the rupiah is still likely to move under pressure, but depreciation is expected to range between Rp16,825 and Rp16,975 per dollar. The Rp17,000 per dollar level has now become an important threshold, as several market projections also place it as the nearest pressure boundary should sentiment fail to improve,” he told ANTARA in Jakarta on Tuesday.
He explained that current global sentiment remains the primary pressure factor on the rupiah.
Conflict in the Middle East or West Asia has pushed oil prices sharply higher, briefly touching above $115 per barrel during Asian trading and breaking through $100 per barrel on Monday, 9 March 2026.
In these conditions, the US dollar strengthens as it is viewed as the safest asset when uncertainty increases and markets begin reducing expectations for US Federal Reserve rate cuts.
Across Asia, the pattern is uniform: regional currencies weaken due to higher oil prices, a stronger US dollar, and increased market caution.
Regarding domestic sentiment, pressure stems from fiscal concerns after February 2026’s budget deficit widened to 0.50 per cent of gross domestic product (GDP), sovereign debt yields rose, foreign ownership of government bonds declined, and consumer confidence weakened slightly.
On the supporting side, Josua noted that Bank Indonesia (BI) continues to prioritise rupiah stability, thereby limiting room for interest rate cuts, with exchange rate stabilisation maintained.
“If the conflict continues long-term, its impact on the rupiah could be more severe than current pressures, as markets so far essentially still regard the disruption as non-permanent,” he said.
Long-term warfare potential is assessed to keep energy prices at risk of remaining elevated, raising import and logistics costs, increasing domestic inflation pressure, making external and fiscal balances more vulnerable, and potentially restraining foreign fund inflows into domestic financial markets.
Should this occur, the rupiah risks breaking through Rp17,000 per dollar and remaining weak longer, whilst BI is likely still to maintain its benchmark interest rate and promote a monetary policy stance favouring stability to preserve exchange rate stability.
“In other words, the rupiah’s future direction is heavily determined by two factors: how long the conflict lasts and whether oil prices can convincingly decline again,” Josua said.