US Dollar Strengthens, Pressuring Rupiah to Rp17,750/US$ This Morning
The rupiah exchange rate opened weaker against the US dollar in this morning’s trading. The ‘Garuda’ currency moved into the red after ending the previous day in a stagnant position.
Based on Refinitiv data, the rupiah began trading on Wednesday (2/9/2026) with a decline of 0.23% to the position of Rp17,750/US.ThecurrencyenteredtheredzoneafterclosingatthelevelofRp1t7, 710/US the day before.
At the same time, the US Dollar Index (DXY) continued its strengthening trend. The index, which measures the strength of the greenback against six major world currencies, rose 0.11% to 99.780 as of 09:00 WIB. This increase follows a 0.25% rise in the DXY at the close of Tuesday’s trading (1/9/2026).
Pressure on the rupiah emerged as market participants sought the US dollar as a safe-haven asset following the heating up of the conflict between the United States and Iran. The increased demand for the greenback is reflected in the continued strengthening of the DXY in global markets, which narrows the room for appreciation for other currencies, including the rupiah.
The US recently launched its latest airstrikes against several targets in Iran on Tuesday. These attacks caused global benchmark oil prices to rise by more than 4%, immediately triggering concerns regarding global inflationary pressures.
Geopolitical tensions have also triggered selling in global bond markets. The 10-year US Treasury yield rose to its highest level since January 2025, while the yield on the equivalent Japanese government bond touched 3% for the first time in 30 years. Higher yields increase the attractiveness of dollar-denominated assets while simultaneously driving demand for safe-haven currencies. This movement has further limited the room for appreciation for emerging market currencies, including the rupiah.
The probability of a Federal Reserve (The Fed) interest rate hike in September has also increased to 68%, up from approximately 35% before the speech by Fed Chair Kevin Warsh at the Jackson Hole symposium last Friday. Warsh stated that the Fed still has work to do if inflation fails to move back towards the 2% target. Fed Governor Michael Barr also stated that interest rates need to be raised if inflation does not subside immediately.
Markets are now awaiting the US August employment report, to be released this Friday. Labour and inflation data will be crucial determinants before the Fed meeting on 15-16 September. Strong data could increase the likelihood of a rate hike and further lift the US dollar.
Amidst this global pressure, the market is also closely watching Bank Indonesia’s (BI) strategy to safeguard the rupiah. BI Governor Destry Damayanti expects the Garuda currency to be in an appreciating trend by 2027, within the range of Rp17,300-Rp17,800/US$.
“By 2027, the rupiah is expected to be in an appreciating trend within the range of Rp17,300 to Rp17,800,” said Destry during a working meeting with Commission XI of the Indonesian House of Representatives (DPR RI) on Tuesday (1/9/2026).
Rupiah stability will be supported by a single-door export policy and the implementation of Government Regulations regarding Export Proceeds from Natural Resource Foreign Exchange (DHE SDA). This policy is expected to increase foreign exchange receipts while strengthening foreign exchange reserves.
BI will also rely on foreign exchange intervention, interest rate policies, hedging, deepening of the money and foreign exchange markets, as well as the management of liquidity and foreign exchange reserves. Supervision of banks and companies engaging in large-scale US dollar purchases will also be strengthened through coordination with the Financial Services Authority (OJK).
“Furthermore, Bank Indonesia will continue to strengthen supervision of banks and corporations with high US dollar purchasing activities through coordination with OJK, and strengthen foreign exchange transaction reporting regulations,” explained Destry.
This series of policies is aimed at strengthening the supply of foreign exchange and maintaining rupiah volatility. However, in the short term, the strengthening dollar, rising US bond yields, and the surge in oil prices remain significant pressures on the Garuda currency.