The Indonesian rupiah traded near its record low of IDR 17,130 per dollar on Thursday, despite the U.S. dollar index lingering around a six-week low on optimism over a possible Middle East truce. The currency continues to face pressure from several fronts: elevated oil prices, persistent capital outflows, fragile domestic fundamentals, and seasonal dividend repatriation. These dynamics are expected to keep the central bank actively intervening in the foreign exchange market, a stance that could further weigh on FX reserves, which had already declined to a near two-year low in March.
At the same time, the IMF trimmed its 2026 growth forecast for Indonesia to 5.0% from 5.1%, highlighting ongoing global uncertainty. Inflation risks are skewed to the upside, driven by volatile energy prices and rising fiscal burdens tied to several major government programs, even though March CPI remained within Bank Indonesia’s target range. The central bank is scheduled to hold its next policy meeting next week, after keeping its benchmark rate unchanged in March for a sixth consecutive meeting, following a cumulative 150bp in cuts since September 2024.
