Indonesian rupiah firms on softer dollar; BI keeps policy rate

The Indonesian rupiah strengthened to below IDR 17,800 per U.S. dollar on Thursday, extending recent gains as the dollar index hovered near a three-month low.

The greenback remained under pressure after the U.S. unveiled measures to contain long-term borrowing costs, including expanded bond buybacks.

Domestically, Bank Indonesia reaffirmed its focus on currency stability at its first policy meeting under acting Governor Destry Damayanti, following Perry Warjiyo’s abrupt exit.

As expected, the central bank held its key rate at 5.75% for a second month, signaling policy continuity after a total 100bp hike since May.

Officials stressed the policy mix would prioritise rupiah stability and guard against imported inflation, while liquidity tools would support growth.

The rupiah has gained about 0.4% this week, adding to strength from the prior two weeks, though upside remains capped by caution ahead of Q2 current account data, after Q1’s deficit hit its largest since 2019 on weaker trade.