Is the Tightening of Foreign Exchange Transactions Effective in Curbing Rupiah Weakness?

Bank Indonesia is lowering the threshold for cash purchases of dollars against the rupiah starting 1 April 2026. This tightening of transactions is aimed at dampening the impact of geopolitical turbulence on the weakening of the rupiah currency.

BI Governor Perry Warjiyo stated that this effort is to maintain foreign exchange flows. “Some of the measures we are taking include strengthening foreign exchange transaction policies that will begin in April to support rupiah exchange rate stability, namely adjusting the cash purchase threshold for foreign exchange against the rupiah from US$100,000 per participant per month to US$50,000 per participant per month,” said Perry during the Board of Governors Meeting on Tuesday, 17 March 2026.

Previously, individuals or companies could purchase up to US$100,000 in cash dollars per month without providing purchase documents. Starting April 2026, the threshold is being lowered. This means that anyone purchasing more than US$50,000 in cash dollars per month must provide supporting documents justifying the need for the purchase or underlying documents.

BI is also implementing two other transaction policies simultaneously, namely increasing the DNDF/forward sale threshold from US$5 million per transaction to US$10 million per transaction and increasing the buy and sell swap threshold from US$5 million to US$10 million per transaction.

Permata Bank’s Chief Economist Josua Pardede stated that the central bank’s new policy is quite effective in curbing short-term pressure on the rupiah. “However, its impact is greater as a buffer against volatility rather than a driver of sharp strengthening,” he told Tempo on Tuesday, 24 March 2026.

According to Josua, in terms of effectiveness, it will primarily be seen in changes in market behaviour. The lowered cash purchase limit and documentation for overseas transfers make medium-to-large foreign exchange transactions more quickly monitored, thus narrowing the room for excessive precautionary dollar purchases.

At the same time, the increase in DNDF or forward and swap limits expands the space for businesses to hedge in the domestic market, so that dollar needs are not entirely concentrated in the spot market. “So the direction of the policy is clear: to hold back US dollar demand that could accelerate weakening while expanding more orderly risk management channels,” he said.

With foreign exchange reserves at the end of February 2026 amounting to US$151.9 billion or equivalent to 6.1 months of imports, BI still has sufficient buffers to maintain market stability. However, the main source of rupiah pressure at present comes from external factors.

BI recorded that in March 2026, there was a net portfolio capital outflow of US$1.1 billion, and the rupiah was traded near its weakest record around 17,000 per US dollar. Therefore, this new policy is an effort to prevent the rupiah from weakening too quickly and too deeply, not as a tool that by itself reverses the rupiah’s direction to strength.

To achieve rupiah strengthening, BI needs external support from improving global sentiment, falling oil prices, and recovering foreign capital inflows. “So it’s not solely from tightening foreign exchange transaction rules,” said Josua.

Bank Indonesia reported on 16 March 2026 that the rupiah was around 16,985 per US dollar, weakening 1.29 per cent compared to the end of February. Meanwhile, Jakarta Interbank Spot Dollar Rate (JISDOR) data recorded that at the close of trading on 17 March 2026, the rupiah was at 16,982 per US dollar. In the spot market, at the close on 24 March 2026, the rupiah was recorded at 16,897 per US dollar or up 99 points from the previous day.