Rupiah Weakens Amid Global Economic and Geopolitical Uncertainty

The rupiah exchange rate weakened at the close of trading on Thursday, falling 32 points or 0.18 percent to Rp17,794 per US dollar from the previous Rp17,762 per US dollar.

Muhammad Amru Syifa, from the Research and Development division of the Indonesia Commodity & Derivatives Exchange (ICDX), stated that the depreciation was influenced by global economic and geopolitical uncertainty.

“Global economic and geopolitical uncertainty is driving demand for safe-haven assets, thus limiting the potential for rupiah appreciation,” he said in Jakarta on Thursday.

Further sentiment stemmed from the strengthening US dollar, which continues to weigh on emerging market currencies. The Federal Reserve’s lack of a strong signal regarding interest rate cuts has kept investors placing their funds in dollar-based assets.

On the domestic front, Bank Indonesia (BI) decided to raise its benchmark interest rate, the BI-Rate, by 25 basis points to 5.75 percent during the June 2026 Board of Governors Meeting. The deposit facility rate was also raised by 25 bps to 4.75 percent, and the lending facility rate increased by 25 bps to 6.50 percent.

According to Amru Syifa, the central bank actually had room to maintain its current policy stance while evaluating the effectiveness of its measures on exchange rate stability and economic activity. Moreover, annual inflation recorded at 3.08 percent in May is still considered manageable, meaning there was no urgency for BI to further tighten monetary policy.

Nevertheless, the central bank opted to raise rates amid persistently high global uncertainty and as a pre-emptive step to keep inflation in 2026 and 2027 within the government’s target range of 2.5±1 percent.

The Bank Indonesia Jakarta Interbank Spot Dollar Rate (JISDOR) also moved weaker today, reaching Rp17,826 per US dollar from the previous Rp17,753 per US dollar.