Rupiah Struggling: A Return to 16,000 per Dollar is Impossible
Pressure on the Rupiah exchange rate is intensifying. Slowly but surely, the US Dollar has returned to the 18,000 level.
Erwin Gunawan Hutapea, Head of the Monetary Management and Securities Assets Department at Bank Indonesia, explained that the weakening of the Rupiah is caused by concerns over global inflationary pressures and fiscal risks. Additionally, oil prices have risen above US$105 per barrel due to the lack of an agreement regarding the opening of the Strait of Hormuz.
“This has driven expectations for further tightening of US monetary policy, causing the 10-year US Treasury yield to rise back to 5.23%, the highest since 2007,” he stated in a written report.
The Rupiah’s weakness is also driven by an increase in foreign exchange demand by importers towards the end of the third quarter of 2026. “There is an outflow of funds from emerging market asset portfolios amidst rising bond yields,” he added.
Nevertheless, the movement of the Rupiah remains in line with regional currencies, with a limited quarter-to-date (QTD) depreciation of 0.67%. Foreign exchange reserves were recorded to have increased to the level of USD 146.5 billion at the end of August 2026.
Erwin stated that Bank Indonesia continues to be present in the market to ensure that market mechanisms function properly and that the stability of the Rupiah exchange rate is maintained according to its fundamentals.
“Furthermore, Bank Indonesia is managing the interest rate structure in the money market by strengthening pro-market monetary operation strategies,” explained Erwin.
The effectiveness of exchange rate stabilisation is also being strengthened, and liquidity adequacy is being maintained by increasing incentives for Swap instruments and Domestic Non-Deliverable Forward (DNDF) hedging to Bank Indonesia for foreign funding purposes.
“Intervention will continue to be carried out consistently and sustainably through Non-Deliverable Forward (NDF) transactions in the offshore market, spot transactions, and DNDF in the domestic market, accompanied by the purchase of Government Securities (SBN) in the secondary market. Coordination and communication with corporations and market participants continue to be conducted intensively.”
Rupiah Outlook
Chief Economist at Bank Permata, Josua Pardede, said the Rupiah has a high probability of breaching the 18,200 level per US Dollar if global pressures remain strong.
“The Rupiah could still move towards 18,200/US$, although this is treated as a pressure scenario. Since the move from 18,000 to 18,200 is only about a 1% weakening, that level could be touched if global pressures continue to haunt us,” Josua told CNBC Indonesia.
According to him, there are three factors that could cause the Rupiah to weaken further. First, global oil prices remaining at the US$100 per barrel level; second, the 10-year US Treasury yield remaining above 5%; and third, the presence of foreign investor outflows.
“There are three conditions that, if they occur simultaneously, could deepen the Rupiah’s weakness: oil prices staying above US$100 per barrel, 10-year US bond yields remaining above 5%, and negative capital flows occurring at the same time,” explained Josua.
Meanwhile, the Head of the Centre for Macroeconomics and Finance at the Institute for Economic and Finance Development (INDEF), M. Rizal Taufikurahman, said the possibility of the Rupiah hitting the 18,200 level per US Dollar is wide open.
“The potential for the Rupiah to breach 18,200 per US Dollar is open in the coming weeks,” said Rizal.
Moreover, the gap from 18,000 to 18,200 is very slim, at only 1.1%, so that level represents a risk scenario that needs to be anticipated.
“The potential for the Rupiah to breach that level is wide open if the strengthening of the Dollar, capital outflows, and foreign exchange needs continue,” said Rizal.