Bank Indonesia confident rupiah will strengthen from July as foreign exchange demand eases
Jakarta (ANTARA) - Bank Indonesia (BI) is confident that the rupiah exchange rate will strengthen starting from July 2026, following the easing of seasonal foreign exchange (forex) demand trends that peaked between April and June 2026. The demand for US dollars increased seasonally during the April-June period due to foreign debt repayments, dividend repatriations, and requirements for the Hajj pilgrimage.
“Once again, we emphasise our belief that the rupiah will strengthen in the future. Currently, it is under pressure and undervalued due to global factors and seasonal demand in April, May, and June; God willing, it will strengthen in July,” stated BI Governor Perry War<0x9D>iyo during a working meeting with Commission XI of the Indonesian Parliament in Jakarta on Monday.
Perry believes that the average rupiah exchange rate throughout 2026 will remain within the macro-economic assumptions of the State Budget (APBN), specifically between Rp16,200 and Rp16,800 per US dollar, with a midpoint of approximately Rp16,500 per US dollar. Meanwhile, the year-to-date (YTD) average exchange rate currently sits around Rp16,900 per US dollar. Nevertheless, the central bank is optimistic that rupiah strengthening in July and August will bring the annual average back within the target range.
Beyond domestic factors related to high forex demand, Perry explained that current pressure on the rupiah is influenced by deteriorating global conditions following the outbreak of war in the Middle East last February. Rising global geopolitical risks are reflected in increased Credit Default Swaps (CDS), surges in world oil prices, and high inflation in the US, which has reduced the likelihood of interest rate cuts by the Fed.
These conditions have also driven up US Treasury yields for both short- and long-term tenors, triggering US dollar strength and capital outflows from emerging markets, including Indonesia. Regarding capital flows, Perry revealed that the stock market recorded an outflow of Rp26.06 trillion during January-March 2026, while the Government Securities (SBN) market experienced an outflow of Rp25.1 trillion during the same period.
Meanwhile, the Bank Indonesia Rupiah Securities (SRBI) instrument initially recorded inflows in January and February before reversing to an outflow in March as global geopolitical tensions rose. To maintain the attractiveness of capital inflows, Perry explained that BI increased SRBI interest rates, leading the instrument to record inflows of Rp48.26 trillion in April and Rp27.05 trillion in May. Consequently, total SRBI inflows from April to 8 May 2026 reached Rp75.31 trillion, with a cumulative year-to-date total of Rp105.16 trillion.
Perry also noted that SBN purchases by foreign investors are beginning to increase, while foreign fund flows into the stock market started recording inflows in early May, despite remaining in an outflow position for the year-to-date. He noted that these capital inflows help bolster the domestic foreign exchange supply amidst high US dollar demand caused by global and seasonal factors.
He further predicted that the need for intervention will decrease from July to August as seasonal forex demand eases. “Alhamdulillah, there has been an inflow of Rp67.3 trillion (total across all instruments from January to 8 May 2026), which adds to the forex supply. It is still insufficient because demand is currently high and global factors are at play, necessitating our intervention. God willing, in July and August, demand will begin to decrease, allowing us to reduce the scale of intervention,” said Perry.
The rupiah exchange rate closed weaker at Rp17,668 per US dollar at the end of trading on Monday (18/5/2026), down from the previous Rp17,597 per US dollar. The Bank Indonesia Jakarta Interbank Spot Dollar Rate (JISDOR) also weakened to the level of Rp17,666 per US dollar from the previous Rp17,496 per US dollar.