The Tug-of-War Between the Dollar and Rupiah: They Can't Both Be Strong

The Tug-of-War Between the Dollar and Rupiah: They Can’t Both Be Strong

Jakarta, CNBC Indonesia - David E. Sumual, Chief Economist at Bank Central Asia (BCA), revealed an interesting fact regarding the movement of the rupiah exchange rate against the US dollar.

David stated that these two exchange rates cannot both strengthen or appreciate simultaneously.

“It can’t happen, for example, if the dollar strengthens, we (the rupiah) also strengthen by 10%, for instance. Indeed, it seems like playing surfing, manoeuvring according to the direction of the waves. Especially since the global direction is not yet certain,” said David at the Central Banking Forum 2026 themed Indonesia’s Economic Resilience in Facing Global Exchange Rate Volatility, in Jakarta on Monday (13/4/2026).

Thus, economically speaking, exchange rates function like a balance scale. This means that if one currency rises in value due to high demand, the other currency will automatically appear to fall or weaken.

The condition of both the rupiah and the dollar strengthening simultaneously is becoming even more difficult amid the current global situation. Although it is difficult for the rupiah to counter the US dollar, David noted that the government and central bank have undertaken numerous efforts to protect the rupiah’s exchange rate, including through swap agreements with several countries such as China, Japan, Australia, and South Korea.

“Like insurance or a secondary buffer if there’s a traumatic situation like in ’98, we didn’t have agreements like this. It should be noted that the foreign exchange position has a secondary buffer of US$100 billion that can safeguard volatility if needed,” he said.

Additionally, on the non-spot transaction side, Bank Indonesia has set an increase in the threshold for selling Domestic Non-Deliverable Forward (DNDF)/Forward from US$5 million per transaction to US$10 million per transaction, as well as an increase in the threshold for buying and selling Swaps from US$5 million to US$10 million per transaction.

“This is to reduce pressure in the market because we are still concentrated (in the spot market), we need to distribute it to the NDF market, so it doesn’t pile up in the spot market,” said David.

Thus, hedging activities must be reactivated. Through these measures, shocks to the rupiah exchange rate against the dollar can be dampened so that it does not move wildly.