Foreign Bank Economist Reveals When US Dollar Could Return to Rp17,000/US$

Jakarta, CNBC Indonesia - DBS Bank Indonesia projects the rupiah exchange rate against the US dollar will sit in the range of Rp17,800 to Rp18,000 by the end of this year.

Senior Economist at DBS Bank, Radhika Rao, said the forecast could be revised, depending on the interest rate policy decisions of the US central bank, the Federal Reserve (The Fed).

However, Rao believes that, in terms of direction, the rupiah will remain above the 18,000 level. According to her, there is no reason for another sharp weakening of the rupiah against the US dollar.

“Because most of the uncertainty, both on growth and domestically, is already reflected in prices. So, we have already seen some adjustment take place,” Rao said at the DBS Institutional Forum 2026 Media Briefing at the Westin Hotel Jakarta on Wednesday (29/7/2026).

For a sharp depreciation of the rupiah to occur, at least two to three negative catalysts would be needed. Rao said the only potential negative catalyst at present comes from global factors, namely the direction of The Fed’s policy.

Regarding the potential revival of the rupiah, she said risk sentiment remains very elevated. Rao said foreign investors are currently holding back from investing anywhere.

“So, if they decide to invest in, say, Indonesia, or they decide to invest in Korea, the comparison is no longer between Asian countries and developing countries. The comparison is between individual countries, developing countries, and global ones,” she explained.

This is because, Rao said, if the US risk-free yield is in the region of 4.5%-4.6%, there is a differential of around 2%-2.5% with the yield on Indonesian assets. She questioned whether that differential is sufficient to compensate for the risk of investing in Indonesia.

Rao views the rupiah’s return to Rp17,000 per US dollar as dependent on the movement of the greenback’s exchange rate. This is reflected in how the US dollar is currently strengthening against nearly all world currencies.

“You really need a very, very sharp reaction in the dollar itself to bring dollar-rupiah towards Rp17,000,” Rao said.

Furthermore, Rao assessed that the policy for stabilising the rupiah and the financial markets has been appropriate. This includes Bank Indonesia’s (BI) decision to raise its benchmark interest rate (BI Rate) by 100 basis points over the course of this year.

“They have also taken non-interest-rate steps. All of this has really contributed to the stabilisation of the financial markets and the bond market, so I think the prescription is right,” Rao concluded.