Rupiah weakens as expectations that Fed policy rates will stay higher for longer persist
Exchange rate movements remain influenced by the strengthening of the US dollar as expectations grow that the Federal Reserve’s policy of higher interest rates will stay in place longer.
Jakarta (ANTARA) - The rupiah exchange rate at the close of trading today weakened by 50 points or 0.28 percent to Rp17,717 per US dollar from Rp17,667 per US dollar previously.
Muhammad Amru Syifa of the Research and Development division at the Indonesia Commodity & Derivatives Exchange (ICDX) said the depreciation was due to rising expectations that the Federal Reserve’s high interest rate policy would remain in place longer.
‘Exchange rate movements are still being influenced by the strengthening of the US dollar as expectations grow that the Federal Reserve’s high interest rate policy will remain in place longer,’ he told ANTARA in Jakarta on Friday.
Globally, the main sentiment remains affected by developments in geopolitics in the Middle East, particularly the negotiations between the United States and Iran, potential disruptions in the Hormuz Strait, and the dynamics of world oil prices which influence global risk sentiment and the strengthening of the US dollar.
In addition, the direction of Federal Reserve policy, movements in the US dollar index (DXY), and yields on US government bonds also remain important factors influencing the rupiah’s movements.
Nevertheless, pressure on the rupiah is not expected to be deep after Bank Indonesia (BI) at its Board of Governors’ meeting on 19–20 May 2026 decided to raise the BI Rate by 50 basis points to 5.25 percent as part of measures to maintain exchange-rate stability and reduce volatility in domestic financial markets.
Furthermore, domestic sentiment is focused on further BI steps to maintain rupiah stability after the BI Rate hike, including strengthening intervention in the foreign exchange market and preserving the appeal of domestic financial instruments.
‘Fundamental economic conditions such as inflation and foreign exchange reserves will also help determine the rupiah’s direction,’ Amru said.
The Jakarta Interbank Spot Dollar Rate (JISDOR) quoted by Bank Indonesia also moved weaker today to Rp17,717 per US dollar from Rp17,673 per dollar previously.