Rupiah Predicted to Weaken to 18,000 per US Dollar, Here Are the Factors

The rupiah exchange rate opened weaker on Friday morning (26/6). Economic, currency and commodity analyst Ibrahim Assuaibi stated that the depreciation was in line with predictions. He estimated the rupiah would touch Rp18,000 per US dollar by the end of the week. “This morning, as predicted, the rupiah weakened. The depreciation is quite sharp at 47 points. It is currently trading at Rp17,990 (per US dollar). It is likely that by the end of the week, the rupiah will hit the Rp18,000 level,” Ibrahim said in a statement on Friday (26/6). He cited several external and internal factors for the depreciation. Externally, a number of data points have strengthened the US dollar index. “Last night, a lot of data was released in the United States that was very decisive for fluctuations in the dollar index price,” he explained. The first was the US gross domestic product (GDP) for the first quarter, which was quite good. Then there was a decrease in unemployment data and a solid core personal consumption expenditure price index. “This is what made the dollar strengthen quite sharply,” Ibrahim said. “Because the dollar index target itself is likely at 102,600. So it is natural for the dollar to strengthen, due to speculation that the US central bank will raise interest rates twice in 2026. In July or September, and then in December,” he explained. On the domestic front, Ibrahim sees several data points that the market will likely scrutinise. These include inflation, foreign exchange reserves, the PMI manufacturing index, and the trade balance. “Inflation is likely to rise because the increase in non-subsidised fuel prices has caused staple food prices in the market to soar as transportation costs also rise. June’s inflation is likely to be higher than the previous month’s,” he said. Indonesia’s foreign exchange reserves are also likely to shrink. This is because, according to Ibrahim, Bank Indonesia has been very active in intervening in the international market, the domestic market, bonds and government securities, as well as raising the interest rate by 100 basis points. Furthermore, the manufacturing PMI data is likely to contract. “Previously it was at the 50 level. But we see that manufacturing companies are experiencing problems, bankruptcies, and layoffs. It is likely that the manufacturing PMI data will contract again, below 50,” he stated. The trade balance is likely to remain in surplus, but it will shrink sharply. Ibrahim noted that China’s own trade balance is currently experiencing problems, which will also cause issues for Indonesia’s trade balance. “There will be a surplus, but the surplus will narrow, so the market will continue to watch the trade balance because it impacts the current account and the budget deficit,” he explained. “The budget deficit ceiling in the state budget is 2.68%. Currently, it is already above 2.8%. It could approach the 2.9% level and head towards 3%. This is what market players, including the World Bank, the IMF, and international governments, are likely observing,” he concluded.