Rupiah Strengthens on Release of BI Business Activity Survey

The rupiah strengthened by 65 points, or 0.45 percent, to close at Rp17,921 per US dollar on Friday, compared to the previous close of Rp17,986 per US dollar. Money market analyst Ibrahim Assuaibi attributed the gain to the release of Bank Indonesia’s (BI) Business Activity Survey (SKDU) for the second quarter of 2026. The survey indicated that business activity increased, with the Weighted Net Balance (SBT) rising to 12.97 percent from 10.11 percent in the previous quarter. The uptick was driven by improved performance in major sectors, including Agriculture, Forestry, and Fisheries; Construction; and Mining and Quarrying, as well as Accommodation and Food Services, which benefited from sustained demand during the National Religious Holiday period and the school holiday high season. Production capacity utilisation also rose to 73.8 percent in the second quarter, up from 73.33 percent in the previous quarter, supported primarily by the Agriculture, Forestry, and Fisheries; Mining and Quarrying; and Electricity Procurement sectors. Overall, business financial conditions remained sound in terms of liquidity and profitability, with easy access to credit. For the third quarter of 2026, respondents forecast a slight slowdown in business activity, with the SBT at 11.75 percent. Sectors expected to improve include the Processing Industry, Wholesale and Retail Trade, and Car and Motorcycle Repair, driven by anticipated sustained public demand, as well as Construction, supported by ongoing government and private projects. Mining and Quarrying activity is also predicted to increase, influenced by reduced rainfall. A separate survey, the Prompt Manufacturing Index (PMI) by BI, recorded manufacturing performance at 51.43 percent in the second quarter, slightly lower than the previous period’s 52.03 percent. The PMI was supported by expansion in components such as Production Volume (53.81 percent), Finished Goods Inventory Volume (53.00 percent), and Total Order Volume (52.77 percent). On the global front, the ongoing conflict between the US and Iran has raised concerns about higher energy costs potentially fuelling inflation. Analysts noted that rising oil prices could complicate the Federal Reserve’s policy outlook by increasing the likelihood that inflation remains above target. Despite recent data showing a decline in consumer and producer price pressures, markets largely dismissed the retrospective figures amid fears that renewed energy price increases could reverse the disinflation trend. Federal Reserve officials continue to stress that inflation risks persist and have repeatedly warned that higher oil prices from Middle East tensions could complicate the inflation outlook, stating that several more months of low price data are needed before considering interest rate cuts. The Jakarta Interbank Spot Dollar Rate (JISDOR) also strengthened to Rp17,944 per US dollar from the previous Rp18,041 per US dollar.