The Indonesian rupiah weakened to approximately IDR 16,830 against the dollar on Thursday, following a period of relative stability over the previous three trading sessions. This depreciation was primarily influenced by a stronger US dollar, as the dollar index surged to its highest level in nearly two weeks amidst expectations of a slower trajectory for potential Federal Reserve rate reductions.
Domestically, new data indicated that Indonesia's economy expanded by 5.11% in 2025, falling short of the government's growth target of 5.2%, despite robust fourth-quarter performance. This outcome increased speculation that Bank Indonesia could have more room to further relax its monetary policy during the year. The central bank has underlined the importance of fostering growth, given the consensus that economic output remains below its potential, even after a cumulative 150 basis point rate cut since September 2024.
Investor sentiment was also subdued with anticipation of January's foreign exchange reserves data, expected to be released on Friday, following a nine-month high recorded in December. Nevertheless, the rupiah's decline was somewhat mitigated by remarks from Finance Minister Purbaya Yudhi, who expressed confidence that the currency could move toward IDR 15,000 per dollar, provided that supportive policy measures are implemented.
