The Indonesian rupiah inched higher to around IDR 17,490 per dollar on Wednesday, recovering after briefly weakening beyond 17,500 the previous day to a new record low. The move was supported by growing speculation that Bank Indonesia may raise its benchmark interest rate at next week’s meeting—after holding it at 4.75% since October—in an effort to curb capital outflows and stabilize the currency. Sentiment was further lifted by the government’s plan to launch a bond stabilization fund to support the domestic debt market amid rising yields and persistent foreign selling.
However, the rupiah’s rebound remained limited as the US dollar index strengthened following hotter-than-expected US inflation data, which dampened expectations for imminent Federal Reserve rate cuts. President Prabowo recently criticized Bank Indonesia Governor Perry Warjiyo over the rupiah’s weakness and endorsed seven new policy measures, including tighter foreign-exchange regulations and liquidity adjustments. Despite the latest support, the rupiah is still down about 4.6% so far this year, pressured by soft economic fundamentals, declining foreign-exchange reserves, fiscal constraints, and ongoing capital outflows.
