BI Says Rupiah is "Undervalued", Can It Strengthen Again?

JAKARTA, KOMPAS.com — The rupiah has breached the psychological level of Rp 17,000 per US dollar amid capital outflows and global geopolitical volatility. However, amid this pressure, Bank Indonesia (BI) assesses that the current exchange rate is below its fundamental value, or undervalued. This assessment raises a new question: is the rupiah’s weakening merely temporary, and is there still room for it to strengthen again? Year-to-date, or since the beginning of 2026, the rupiah has weakened by 3.06 per cent. This pressure coincides with net capital outflows of US$1.47 billion, or approximately Rp 25.1 trillion. The outflows mainly come from the stock market at US$1.80 billion, although the government bond market still records inflows of US$330 million. However, amid this pressure, BI Governor Perry Warjiyo believes that the rupiah’s weakening does not yet reflect domestic economic fundamentals. “We emphasise that the current rupiah exchange rate is undervalued compared to the fundamentals,” Perry said during a press conference following the BI Board of Governors’ Meeting (RDG) on Wednesday (22/4/2026). Based on BI data, the rupiah exchange rate stood at Rp 17,140 per US dollar on 21 April 2026, weakening by 0.87 per cent compared to the end of March 2026. The view that the rupiah is undervalued is based on several fundamental indicators that BI considers remain relatively solid. First, Indonesia’s economic growth is projected to remain in the range of 4.9 to 5.7 per cent in 2026, amid external pressures. Second, inflation is still maintained within the target of 1.5 to 3.5 per cent, although in March 2026 it was near the upper limit of the target at 3.48 per cent.