FX.co ★ Rupiah Remains Weak Ahead of Policy Decision

The Indonesian rupiah hovered near IDR 17,170 on Wednesday, holding above the key 17,000 level after briefly touching a record low around 17,200 last week. Market sentiment remained fragile as the U.S. dollar strengthened, with safe-haven demand rising following the collapse of plans for a second round of U.S.–Iran peace talks. Bank Indonesia is set to announce its policy decision later today, and markets widely expect a seventh consecutive hold at 4.75%, as policymakers have signaled limited room for additional easing after delivering 150 bps of rate cuts since September 2024. As a net oil and gas importer, Indonesia remains vulnerable to higher energy prices despite recent increases in non-subsidized fuel costs. Inflation risks have intensified, while capital outflows have persisted during the dividend payout season. At the same time, foreign exchange reserves fell to a two-year low in March as the central bank ramped up market intervention. Fiscal pressures have also increased under President Prabowo’s flagship programs, though officials have reiterated their commitment to maintaining the 3% budget deficit cap this year.