Rupiah Likely to Fluctuate at Rp17,000 Level Ahead of Eid Holiday
The exchange rate of the Indonesian rupiah against the United States dollar is predicted to move dynamically with a tendency towards limited weakness in trading on Wednesday, 18 March 2026. This movement represents a market response following Bank Indonesia’s decision to maintain the benchmark interest rate (BI-Rate) at 4.75% in the Board of Governors Meeting (RDG) that concluded on Tuesday.
The primary sentiment weighing on the rupiah is geopolitical tension in the Middle East, which has entered its third week. This conflict has triggered concerns about disruptions to crude oil supplies through the Strait of Hormuz, which could potentially drive up global inflation and weaken currencies of developing nations, including Indonesia.
The monetary policy decision was taken as a preventive measure to strengthen the stability of the rupiah’s exchange rate from the deteriorating impact of global conditions due to war in the Middle East, whilst maintaining the 2026-2027 inflation target within the range of 2.5±1%.
Markets remain monitoring the impact of war on crude oil prices worldwide. Significant increases in energy prices represent a heavy burden for Indonesia’s trade balance as an oil importer, ultimately pressuring foreign reserves.
Market participants are adopting a wait-and-see stance regarding the guidance of the US central bank’s (The Fed) monetary policy. Should The Fed reaffirm its commitment to higher interest rates for a prolonged period (higher for longer), the US dollar stands to continue strengthening.
Ahead of the extended Eid al-Fitr holiday 2026, which begins at the end of this week, transaction activity in the regular market is expected to slow. However, analysts warn of potential high volatility due to increased demand for foreign currency among the public for homecoming trips and holiday purposes.
The rupiah exchange rate closed at Rp16,997 per US dollar today (17/3). The currency has experienced fluctuations around the Rp16,965-Rp16,997 range against the backdrop of Middle Eastern geopolitical tensions. The assumption in the 2026 state budget assumes an exchange rate around Rp16,500 per US dollar, whilst the rupiah currently approaches the Rp17,000 level, creating potential fiscal concerns.
Since the outbreak of the Israel-Hamas conflict in the region, the rupiah has depreciated by approximately 0.3% against the US dollar. Earlier in March, the currency breached the psychological Rp17,000 level due to surges in global crude oil prices and mounting regional tensions.