Rupiah breaks through Rp17,600, markets begin to speculate BI will raise interest rates
JAKARTA — The rupiah’s depreciation, which breached the Rp 17,668 per US dollar level, has sparked fresh concerns in the domestic financial market. The development has fueled speculation that Bank Indonesia (BI) could raise its policy rate by 25 basis points to 5 percent to curb pressure on the rupiah and dampen market volatility.
Nafan Aji Gusta, Senior Market Analyst at Mirae Asset Sekuritas, said the current rupiah depreciation signals rising investor risk perception toward Indonesian assets. He noted that the depreciation of the Garuda currency is also weighing on the Movement of the Jakarta Composite Index (IHSG), which remains volatile.
‘Market tends to respond to rupiah movements that have depreciated sharply to break through the Rp 17,668–Rp 17,681 per US dollar range. This is one of the lows that raises concerns about rising risk perception in Indonesian asset markets,’ he told Kompas.com on Tuesday (19 May 2026).
‘Me leaning the rupiah’s weakness has spawned strong market speculation that BI is very likely to raise the policy rate by 25 bps to 5 percent at the BI RDG scheduled for 19-20 May 2026,’ he added.
The policy is seen as an intervention to safeguard rupiah stability amid rising global pressures. Nafan noted that if the rate increase is met with a positive market response, the strategy could prevent a deeper fall in the IHSG.
‘This is aimed at intervening in the rupiah’s weakness, and if met with a positive response it could restrain further declines in the index,’ he said.
Technically, the IHSG still appears to be in oversold territory based on the Relative Strength Index (RSI) and has managed to test the ‘wave 5/A’ target. Meanwhile, the stochastic K_D indicator continues to show negative signals, though trading volume has begun to pick up.
On Monday (18 May 2026), foreign investors posted a net selling of Rp 460.34 billion. Year to date (YTD), total net foreign selling in Indonesia’s stock market has reached Rp 50.63 trillion.