Bank Indonesia (BI) maintains a firm outlook that the rupiah remains poised to strengthen toward the Rp 16,500 level against the US dollar this year. This optimism persists despite the national currency currently facing significant downward pressure driven by volatile global factors and a seasonal surge in foreign exchange demand.
Ramdan Denny Prakoso, Executive Director of the Communications Department at Bank Indonesia, emphasized that the central bank is deploying all available policy instruments to safeguard the stability of the rupiah. He noted that the recent depreciation is primarily linked to the seasonal peak in demand for US dollars between April and June.
“After passing the high-demand season for the dollar—specifically April, May, and June—we are confident that the rupiah has strong potential to appreciate,” Ramdan stated following a meeting with Commission XI of the House of Representatives on Monday (May 18).
BI projects that the average exchange rate for 2026 will settle at Rp 16,500 per US dollar, fluctuating within a range of Rp 16,200 to Rp 16,800. To achieve this, the central bank continues to implement seven strategic measures to reinforce the currency while closely monitoring an uncertain global landscape.
External pressures remain significant, fueled by rising global oil prices due to tensions in the Strait of Hormuz and a surge in US Treasury yields, which are currently hovering between 4.6% and 4.7%. According to Ramdan, these conditions have exerted broad pressure on currencies across most emerging markets. “If we look at May, many countries are seeing their currencies weaken against the US dollar,” he added.
Bank Indonesia Governor Perry Warjiyo echoed this sentiment, asserting that the rupiah is currently undervalued relative to Indonesia’s strong economic fundamentals. He maintained that the projected average of Rp 16,500 is supported by macroeconomic data that remains in line with national projections.
“We remain convinced that for the full year 2026, the average exchange rate will reach Rp 16,500, with a target range of Rp 16,200 to Rp 16,800,” Perry stated. He explained that the current weakness is largely driven by seasonal requirements, including foreign exchange needs for Hajj and Umrah pilgrimages, corporate dividend distributions, and the repayment of foreign debt.
Historically, these pressures tend to subside after June, with the rupiah often showing renewed strength in July and August. Drawing from his extensive experience navigating past financial crises—including 1998, 2008, and the pandemic—Perry noted that such volatility is common during these months.
Perry also addressed the compounding impact of global geopolitical risks, including the conflict in the Middle East and the strengthening of the US dollar. He emphasized that these challenges are not unique to Indonesia but are affecting the global economy at large. “These are global challenges, and virtually every country is facing the same pressure,” he concluded, reaffirming the central bank’s commitment to navigating these headwinds effectively.
Summary
Bank Indonesia remains optimistic that the rupiah will strengthen to an average of Rp 16,500 per US dollar by the end of the year. While the currency is currently experiencing depreciation due to seasonal foreign exchange demand and global pressures, the central bank expects these conditions to stabilize after June. Officials emphasize that the current weakness is temporary and does not reflect the underlying strength of Indonesia’s economic fundamentals.
To support this target, Bank Indonesia is deploying various policy instruments to navigate external challenges, such as rising oil prices and fluctuating US Treasury yields. The central bank maintains that the current volatility is a shared experience among emerging markets rather than an isolated issue. Despite ongoing global geopolitical risks, authorities remain confident in their projections and continue to monitor the landscape to ensure long-term currency stability.
