Rupiah Under Pressure: Factors Contributing to Its Weakening

JAKARTA, KOMPAS.com – The rupiah exchange rate against the US dollar briefly surpassed the Rp 17,400 level, raising concerns among market players. This pressure on the rupiah is assessed not only to be influenced by global dynamics but also linked to several domestic fundamental economic factors. The weakening occurred amid a combination of external and internal pressures, ranging from the surge in global oil prices and global interest rate policies to the increasing domestic need for foreign exchange. Bank Indonesia Governor Perry Warjiyo emphasised that the pressure on the rupiah stems from two main sources: global factors and domestic ones. “Why is there exchange rate pressure in the short term? The reasons are two: there are global factors and then seasonal factors,” said Perry during the Financial System Stability Committee (KSSK) press conference on Tuesday (5/5/2026). From the global side, several external sentiments are exerting strong pressure on the currencies of developing countries, including Indonesia. High global oil prices, the rise in the US benchmark interest rate, and the strengthening of the US dollar are the main factors. “There is capital flight from emerging markets, including Indonesia,” said Perry. Lecturer at the Faculty of Economics and Business, Gadjah Mada University (UGM), Eddy Junarsin explained that high US interest rate policies make global investors tend to move funds to assets considered safer. According to him, the Federal Reserve is still holding interest rates at high levels, thus increasing the attractiveness of financial assets in the US. This fund movement causes pressure on the rupiah because demand for the US dollar increases, while the supply of foreign exchange domestically is limited. Another significant factor is the rise in global oil prices. As a net energy importer, Indonesia must spend more to meet its oil import needs. Bank Permata Chief Economist Josua Pardede stated that pressure on the rupiah is intensifying along with rising global oil prices and geopolitical conflicts. In a more severe scenario, he predicts the rupiah could weaken to Rp 18,000–Rp 18,300 per US dollar if oil prices surge higher and global pressures continue. A similar view was expressed by Chief Analyst at Doo Financial Futures, Lukman Leong, who highlighted disruptions in global energy distribution routes. “If the Strait of Hormuz remains closed and crude oil stays above 100 US dollars, the rupiah could reach Rp 18,000,” said Lukman. Eddy explained that Indonesia’s trade balance still shows a surplus, but its value has declined compared to previous periods. This means exports remain larger than imports, but the gap is narrowing, thus weakening support for the rupiah exchange rate.