BI Governor Reports to Prabowo on Two Main Causes of Rupiah Weakness

Jakarta, CNBC Indonesia - Bank Indonesia Governor Perry Warjiyo reported to President Prabowo Subianto regarding the current developments of the rupiah. According to him, there are two reasons causing the rupiah to be undervalued amid growing economic conditions.

“It was discussed earlier and we received guidance on the exchange rate, that the current exchange rate is undervalued. Undervalued, and going forward, we are confident it will stabilise and strengthen,” said Perry after a meeting with President Prabowo at the State Palace, Jakarta, on Tuesday (5/5/2026) evening.

Perry stated that economic growth of 5.61% in the first quarter of 2026, low inflation, strong foreign exchange reserves, and high credit growth should serve as a foundation to indicate that the rupiah will stabilise and strengthen. However, he acknowledged that in the short term, there is pressure on the exchange rate, with it currently breaching the level of Rp17,400 per US dollar.

“The causes are two: global factors, and then seasonal factors,” said Perry.

He explained that the global factors in question include high oil prices, rising US interest rates, high yields on 10-year US Treasury bonds at 4.47%, and the strengthening of the US dollar.

“And the Coordinating Minister for the Economy just mentioned the occurrence of capital flight from emerging markets, including Indonesia,” he said.

In addition, Perry also explained that there are seasonal reasons occurring.

“April, May, June indeed see high demand for dollars, for dividend repatriation payments, debt payments, and also for hajj pilgrims. But the rupiah is undervalued and going forward will stabilise and tend to strengthen. That’s number one,” he said.