Rupiah strengthens as BI response helps stabilise exchange rate

The rupiah closed firmer at Rp17,654 per US dollar, up 52 points or 0.29% from Rp17,706 per US dollar. The Research & Development arm of the Indonesia Commodity and Derivatives Exchange (ICDX), Tiffani Safinia, said the appreciation reflects Bank Indonesia’s response to stabilise the rupiah. ‘Markets are still watching the government’s response and Bank Indonesia in maintaining rupiah stability, including the effectiveness of interventions in the foreign exchange and bond markets,’ she told ANTARA in Jakarta on Wednesday. BI, at its May 2026 Board of Governors Meeting (RDG), decided to raise the policy rate (BI Rate) by 50 basis points to 5.25%. The deposit facility rate was raised by 50 bps to 4.25%, while the lending facility rate also rose by 50 bps to 6%. The rise is part of ongoing steps to strengthen the stabilization of the rupiah against the backdrop of elevated global volatility driven by the Middle East conflict, and as a pre-emptive measure to keep inflation in 2026 and 2027 within the government’s target band of 2.5% plus/minus 1%. For BI, the decision aligns with a 2026 monetary policy focus on stability (pro-stability) to bolster the external resilience of Indonesia’s economy against global shocks. Sentiment was also influenced by President Prabowo’s speech on the direction of economic and fiscal policy, regarded as important for maintaining investor confidence in the prospects for the national economy. On the other hand, the weakness of the Jakarta Composite Index (IHSG) and concerns about foreign capital flows remain factors affecting the rupiah in the short term. Looking at global sentiment, market players have been adopting a wait-and-see approach toward the direction of US monetary policy, including the FOMC minutes and forthcoming US economic data. This has driven investors to shift funds into safer assets such as the US dollar and US Treasuries, putting additional pressure on the rupiah. ‘Moreover, global geopolitical tensions and the strengthening of the US dollar have heightened investors’ caution in financial markets,’ said Tiffani. The Bank Indonesia Jakarta Interbank Spot Dollar Rate (JISDOR) also firmed today to Rp17,685 per US dollar from Rp17,719 per US dollar.