DBS Economist Predicts Major Challenges for Rupiah in Q2

Jakarta, CNBC Indonesia - DBS Bank economists project that the rupiah exchange rate will experience further weakening against the US dollar in the second quarter of 2026.

Senior Economist and Executive Director at DBS Bank, Radhika Rao, stated that this is due to the ongoing tensions and concerns from the current geopolitical situation.

Additionally, there are other uncertainties such as the implementation of the latest Morgan Stanley Capital International (MSCI) assessment on 1 June, government fiscal policies, and the determination of the benchmark interest rate by Bank Indonesia (BI).

However, Rao did not provide more detailed projections for the rupiah exchange rate in the second half of 2026. This is because the DBS Research Group is still calculating further.

“So, by combining all these factors, we expect a bit more rupiah weakening in this quarter,” Rao said during the DBS Research online briefing on Wednesday (13/5/2026).

According to her, the central bank has actually taken various steps to stem the weakening of the rupiah currency. For instance, Rao mentioned “smart interventions,” namely measured interventions in the foreign exchange (forex) market. Then, being active in Domestic Non-Deliverable Forward instruments to maintain rupiah stability, ensuring foreign exchange (FX) needs in the market remain available, and tightening forex transactions to prevent excessive speculation without real underlying transactions.

Rao noted that these steps are actually commonly taken by many central banks. However, the problem is that the continued weakening of the rupiah indicates that external pressures on the rupiah remain strong.

Therefore, Rao assesses that BI may need to assist in stabilising the rupiah through additional policies at this month’s meeting.

Referring to Refinitiv data, the Garuda currency ended trading at Rp17,460/US, orstrengthenedby0.17 at the morning market open.