Rupiah weakens slightly as market digests BI rate hike

The rupiah exchange rate weakened by 10 points, or 0.06 per cent, to Rp17,804 per US dollar at the close of trading on Friday afternoon, compared to Rp17,794 per US dollar previously. Research and Development analyst at the Indonesia Commodity & Derivatives Exchange (ICDX), Muhammad Amru Syifa, said the rupiah’s movement was still influenced by the market’s response to Bank Indonesia’s (BI) decision to raise the BI-rate by 25 basis points to 5.75 per cent. “The policy was taken as a step to strengthen the stability of the rupiah exchange rate amidst high global uncertainty while keeping inflation within the established target range,” he said in Jakarta on Friday. The benchmark interest rate hike is considered to provide positive sentiment for the rupiah because it potentially increases the attractiveness of domestic financial assets and encourages foreign capital inflows. This step also demonstrates BI’s commitment to maintaining national financial market stability. Since May 2026, BI has raised the BI-Rate gradually with a total increase of 100 basis points, bringing the benchmark interest rate back to the level of 5.75 per cent, a level last reached in April 2025. Looking at the global side, market sentiment tended to improve after positive developments emerged in the Middle East. The agreement between the United States and Iran that reopened shipping lanes in the Strait of Hormuz reportedly succeeded in easing market concerns about potential disruptions to global energy supplies. This condition also pushed world oil prices lower. “For Indonesia, which still imports oil, the decline in energy prices can help reduce pressure on foreign exchange needs and the trade balance, thus providing support for the rupiah’s movement,” Amru explained. Nevertheless, the room for rupiah appreciation is expected to remain limited. He explained that the US dollar remains strong as the Federal Reserve still signals that interest rates could potentially be maintained at high levels for a longer period. This condition maintains the attractiveness of US dollar-based assets and keeps global investors cautious about emerging market assets. In addition, Amru continued, market participants are also still observing the latest developments in the Middle East because any potential violation of the agreement or renewed increase in geopolitical tensions could trigger oil price volatility and drive demand for safe-haven assets. “Overall, the rupiah’s prospects after the BI-Rate hike are considered better than several weeks ago. However, the direction of the rupiah’s movement in the short term will still be heavily influenced by global sentiment developments, especially regarding Middle East geopolitical dynamics and the outlook for US monetary policy,” he said. Bank Indonesia’s Jakarta Interbank Spot Dollar Rate (JISDOR) today also moved flat at the level of 15, 826 per US dollar from the previous Rp17,753 per US dollar.