BI Governor Optimistic Rupiah to Strengthen in July–August 2026
Bank Indonesia (BI) is optimistic that the rupiah will strengthen again in July to August 2026 after coming under pressure, touching Rp 17,700 per US dollar. The assurance came after the central bank raised its policy rate and strengthened various rupiah stabilisation instruments.
Gubernur BI Perry Warjiyo said the rupiah’s recent weakness was driven more by global pressures and high domestic demand for foreign currency. He noted that, fundamentally, the rupiah is still undervalued.
“God willing, in July and August the rupiah will strengthen. On various occasions I have said that the rupiah is currently undervalued,” Perry told reporters during a briefing on the outcomes of the BI Board of Governors meeting, held on Wednesday (20 May 2026).
Perry said Indonesia’s economic fundamentals remain relatively strong, reflected in contained inflation, sustained economic growth, and a low current account deficit.
“It should be that the rupiah will strengthen with a low current account deficit, high growth, low inflation, and various good indicators of our economy’s fundamentals,” he added.
In the May 2026 Board of Governors Meeting, BI raised the BI Rate by 50 basis points to 5.25%. The Deposit Facility rate rose to 4.25% and the Lending Facility to 6.0%.
The rate hike was taken as a further step to bolster rupiah stabilisation amid global volatility stemming from the Middle East conflict, while keeping inflation within the target of 2.5% +/- 1% in 2026 and 2027.
In addition to the BI Rate, BI strengthened the appeal of domestic financial instruments by raising the interest rates on Indonesia Rupiah Securities (SRBI). As of 13 May 2026, SRBI yields for 6-month, 9-month, and 12-month tenors rose to 6.21%, 6.31%, and 6.45% respectively.
Perry said the combination of BI Rate tightening, higher SRBI yields, and foreign exchange market intervention were believed to keep foreign capital inflows into the domestic market robust.
“We are confident that with a stronger BI Rate and structural changes to SRBI yields, inflows will remain sizeable into the country,” Perry stated.
BI recorded foreign capital inflows in Q2 2026 amounting to about $5.5 billion as of 18 May 2026. The funds largely went into SRBI instruments and government securities (SBN).
Perry also explained that the rupiah’s pressure stemmed from two main factors. First, worsening global conditions due to the Middle East conflict pushing up oil prices, strengthening the dollar, and capital flight from developing countries. Second, high domestic foreign currency demand from April to June, driven by dividend payments, external debt, and haj/umrah needs.
“From April to June domestic FX demand was high. This occurred amid global pressures and led to sizeable capital outflows,” Perry said.
To maintain rupiah stability, BI continues to increase intervention in the foreign exchange market through Non Deliverable Forward (NDF) transactions offshore and spot and Domestic Non Deliverable Forward (DNDF) transactions onshore.
BI also strengthens foreign exchange policy through adjustments to thresholds for purchasing foreign currency without underlying, increases in DNDF and swap thresholds, and by expanding Local Currency Transactions (LCT).