Rupiah Poised to Rebound to Rp16,800 if Fiscal-Monetary Coordination is Strong

The rupiah’s exchange rate is seen as having significant room for strength or rebound amid global pressures. Trimegah Securities Indonesia’s Chief Economist Fakhrul Fulvian stated that this potential strengthening depends heavily on improving the policy mix and balanced burden-sharing between fiscal and monetary authorities. Fakhrul projected that the rupiah could rebound to Rp16,800-17,000 per US dollar if coordination between the government and Bank Indonesia (BI) is strong. Currently, the rupiah in the offshore market briefly touched Rp17,800 per US dollar, coinciding with the Eid al-Adha holiday on 27-28 May 2026. ‘The current rupiah level is too weak compared to Indonesia’s actual economic capacity,’ Fakhrul told Antara on Thursday, 28 May. He emphasised that exchange rate stabilisation cannot rely solely on BI’s instruments, as the market is closely monitoring the consistency of government policy direction. If BI’s monetary tightening is not accompanied by aligned fiscal stance and policy communication, pressure on the rupiah is expected to remain significant. On monetary measures, Fakhrul praised BI’s recent 50-basis-point rate hike to 5.25%, which he said is crucial for restoring market credibility and demonstrating the central bank’s commitment to medium-term inflation stability. ‘BI is returning to a pre-emptive, front-loaded, and ahead-of-the-curve approach like in 2018,’ he added. Fakhrul warned that bond markets are highly sensitive to fiscal direction perceptions, particularly regarding state budget financing and subsidies. Bond yields could rise if investors worry about external stability. For a long-term solution, Fakhrul urged the creation of a more anti-fragile economic structure through balanced burden-sharing across sectors. ‘We need more balanced burden-sharing between fiscal, monetary, energy, and real sectors so the rupiah does not remain the last resort for all economic pressures,’ he concluded. (Z-10) The rupiah weakened to Rp17,873 per US dollar in the offshore market, with economists noting it bears the brunt of global economic pressures. The rupiah is expected to remain under pressure and could soon reach Rp18,000 per US dollar. Efforts to stabilise the rupiah are deemed insufficient without synchronised fiscal and monetary policies. The rupiah is seen bearing excessive economic pressure, with today’s depreciation said to be deeper than fundamental conditions warrant. The rupiah closed weaker at Rp17,796 per US dollar due to new US-Iran tensions, with analysts warning of potential job losses in the industrial sector. According to Perry, the rupiah’s fundamental value should allow for strengthening, supported by a low current account deficit. He noted that in such circumstances, the central bank must not only control inflation but also maintain confidence in overall policy direction. He explained that interventions occur in both domestic and foreign markets, leading to a $10 billion decline in foreign reserves. BI attributed the rupiah’s drop to $17,500 per US dollar to Middle East conflicts, rising oil prices, and domestic seasonal factors, while remaining optimistic about stability.