Indonesian Rupiah Strengthens Below 18,000 Against Dollar After Rate Hike

Indonesia's rupiah has shown resilience, strengthening to trade below the 18,000 mark against the US dollar after Bank Indonesia (BI) raised its benchmark interest rate by 25 basis points to 5.5 percent. This move signals a renewed confidence in the local currency.

The central bank reported that foreign investors have reacted favorably to its reinforced policy measures. The increase in the BI Rate, coupled with improved yields on Bank Indonesia Rupiah Securities (SRBI) and Government Securities (SBN), has attracted foreign capital inflows. These inflows have been particularly noted in the SRBI market following a recent auction and are beginning to return to the SBN market, especially in shorter and medium-term tenors.

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This is reflected in the increased foreign capital inflows into SRBI instruments following the SRBI auction on June 10, 2026. Foreign capital inflows have also begun to return to the SBN market, particularly in short and medium-term tenors.

Bank Indonesia remains actively monitoring global and domestic financial market fluctuations. The bank is committed to ensuring that Indonesian financial instruments remain attractive enough to sustain these capital inflows. To further stabilize the rupiah, BI is employing a consistent and measured approach, utilizing interventions such as Non-Deliverable Forward (NDF) transactions in offshore markets, alongside spot and Domestic Non-Deliverable Forward (DNDF) transactions domestically.

This latest rate hike follows a more aggressive 50 basis point increase in May 2026, which marked the first policy shift after the benchmark rate had been held steady at 4.75 percent since September 2025. BI Governor Perry Warjiyo indicated that the rupiah's previous depreciation had exceeded projections, prompting the decision for the rate adjustment. In addition to the rate hike, BI has also introduced measures to bolster the rupiah, including restructured interest rates for SRBI, reduced hedging swap rates, and intensified monetary operations.

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The rupiah’s recent depreciation had outpaced the its initial projections, prompting the Board of Governors to pull the trigger on a rate hike during Tuesday’s weekly session.