FX.co ★ Rupiah Strengthens on Central Bank Support

The Indonesian rupiah strengthened to below IDR 16,700 per US dollar on Wednesday, recovering from a recent decline close to 16,820, driven by overall weakness in the US dollar. The dollar index hit a four-year low after President Trump downplayed concerns regarding its depreciation, while policy uncertainties in Washington continued to exert pressure on the greenback. Market sentiment further improved following comments from Bank Indonesia Governor Perry Warjiyo, who clarified that the recent depreciation of the rupiah was not a result of weakening economic fundamentals but due to short-term technical issues and global economic challenges. Warjiyo expressed confidence in a gradual recovery of the rupiah, supported by stable core inflation, and committed to stabilizing the currency through interventions in both spot and forward markets as well as liquidity operations. However, potential gains were tempered after Warjiyo suggested the possibility of further monetary easing this year, even after a cumulative reduction of 150 basis points since September 2024, which lowered the key interest rate to 4.75%. Additionally, market caution was evident ahead of critical domestic data releases scheduled for next week, including figures on inflation, trade, and Q4 GDP.