Bank Indonesia Vows 'All Out' Effort to Stabilize Rupiah

Bank Indonesia (BI) has vowed to intensify its efforts to stabilize the rupiah as Indonesia's currency faces renewed pressure from a strengthening U.S. dollar. Expectations of tighter U.S. monetary policy are driving the dollar's rise, impacting emerging market currencies.

Ramdan Denny Prakoso, Executive Director of BI's Communications Department, stated, "We will continue to be fully present in the market to ensure the rupiah remains stable, and over time we will strengthen the currency." The rupiah had briefly recovered after BI raised its benchmark interest rate, but it has since weakened again, reaching Rp18,003 per U.S. dollar on Wednesday afternoon, July 8.

A primary factor contributing to the rupiah's depreciation is the increasingly hawkish stance signaled by U.S. Federal Reserve officials during the Federal Open Market Committee (FOMC) meeting on June 17. Although the Fed maintained its benchmark interest rate, market participants interpreted policymakers' comments as indicating tighter future monetary policy. This shift in expectations bolstered the U.S. Dollar Index (DXY) and exerted pressure on emerging-market currencies, including the rupiah. Denny explained, "The hawkish signal indicates that the federal funds rate is now expected not to decline this year, but instead could increase." The DXY surged from approximately 95 in January 2026 to 101 by the end of June, reflecting broad dollar strength.

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We will continue to be fully present in the market to ensure the rupiah remains stable, and over time we will strengthen the currency.

Prakoso emphasized that the rupiah's decline is part of a broader trend affecting emerging-market currencies. The Russian ruble experienced the sharpest depreciation, weakening 5.5 percent against the U.S. dollar. Other currencies also saw declines: the Thai baht fell 2.3 percent, the rupiah 1.4 percent, the South Korean won and Philippine peso each 1 percent, the Indian rupee 0.7 percent, and the Chinese renminbi 0.5 percent.

To support the rupiah, Bank Indonesia has implemented several measures. These include a cumulative 100-basis-point increase in the BI Rate between May and June, bringing the benchmark rate to 5.75 percent. The central bank has also intensified its market intervention operations in both domestic and offshore markets and is offering attractive yields on Bank Indonesia Rupiah Securities (SRBI) to attract foreign capital inflows. BI remains committed to maintaining rupiah stability.

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The hawkish signal indicates that the federal funds rate is now expected not to decline this year, but instead could increase.