Bank Indonesia Reveals Reasons for Weakening Rupiah, Neighbouring Countries Suffer Same Fate

Bank Indonesia (BI) has explained that the rupiah’s exchange rate is continuing its weakening trend against the United States dollar.

The depreciation remains influenced by escalating geopolitical tensions in the Middle East, which are hindering peace prospects, consequently keeping oil prices elevated and raising global inflation risks, as well as prompting capital outflows from emerging countries, said BI Senior Deputy Governor Destry Damayanti in a written statement. Additionally, domestic demand is still quite substantial, in line with the pattern of dividend repatriation and foreign debt payments.

Neighbouring countries are experiencing a similar situation. The ringgit weakened 0.55% to MYR 4.012 per US dollar.

Besides the rupiah and ringgit, the Vietnamese dong weakened 0.17% to VND 26,335 per US dollar, the Taiwan dollar fell 0.14% to TWD 31.5 per US dollar, and the Chinese yuan depreciated to CNY 6.775 per US dollar, a correction of 0.09%.

Overall, the rupiah’s depreciation remains in line with the regional trend, having weakened 7.44% year-to-date, she stated.

BI is increasing intervention to curb the rupiah’s depreciation and ensure market mechanisms function properly. At the same time, it continues to strengthen the interest rate structure of pro-market monetary instruments to attract capital inflows into domestic asset instruments.

Intervention is carried out in Non-Deliverable Forward transactions in the offshore market, spot transactions and Domestic Non-Deliverable Forwards in the domestic market, accompanied by purchases of government securities in the secondary market.

Coordination and communication with corporations and other market participants continue to be conducted intensively, she explained.

BI is also encouraging the use of local currencies in bilateral cooperation through the Local Currency Transaction scheme as an effort to reduce dependence on the US dollar and mitigate exchange rate volatility risk. This cooperation has been established with China, Japan, Malaysia, Thailand, South Korea, and the United Arab Emirates.

Diversification of trade transactions through this LCT scheme continues to increase, reaching approximately US$22.7 billion in April, compared to around US$25.7 billion for the entirety of 2025.