Rupiah strengthens as Bank Indonesia raises interest rate
The rupiah exchange rate strengthened by 130 points, or 0.71 percent, to Rp18,058 per US dollar at Tuesday’s close, compared to Rp18,188 per US dollar previously. Money market analyst Ibrahim Assuaibi assessed that the rupiah’s strengthening accompanied Bank Indonesia’s decision to raise its benchmark interest rate, the BI-Rate, by 25 basis points to 5.50 percent on the day. “This increase is a further step to strengthen rupiah exchange rate stabilisation from the impact of high global turmoil due to the war in the Middle East, and as a pre-emptive step to keep inflation in 2026 and 2027 within the government’s target range of 2.5±1 percent,” he said in a written statement in Jakarta on Tuesday. BI Governor Perry Warjiyo confirmed that the benchmark rate increase was also aimed at boosting yields to enhance the attractiveness of foreign portfolio investment inflows into Indonesia. In an evaluation since the monthly Board of Governors Meeting on 19-20 May 2026, Perry said the rupiah exchange rate showed weaker-than-expected developments. Besides ongoing global turmoil and high domestic foreign exchange demand, he said the rupiah’s depreciation was also driven by foreign portfolio investment outflows from Indonesia. In connection with this, BI sees the need to take further steps to strengthen rupiah exchange rate stabilisation by increasing yields and a number of other incentives to encourage foreign investment inflows. Global market sentiment stemmed from the conflict between Iran and the Zionist Israeli regime, which have halted attacks on each other, although Tehran said it would resume attacks if Israel continued to strike Hezbollah in Lebanon. The Israeli newspaper Hayom reported that Tel Aviv and Washington conveyed a message to Tehran that there would be no further attacks from Israel if Iran did not resume attacks. Bank Indonesia’s Jakarta Interbank Spot Dollar Rate also moved stronger today to Rp18,141 per US dollar from Rp18,171 per US dollar previously.