Indonesian central bank to continue intervening to defend depreciating rupiah
A man holds rupiah bank notes at a livestock market ahead of Eid al-Adha in Bogor, West Java province, Indonesia, June 10, 2024. REUTERS/Willy Kurniawan
JAKARTA, Jan 14 : Indonesia's central bank will keep intervening in the foreign exchange markets to ensure moves in the rupiah exchange rate reflect the currency's fundamentals, it said on Wednesday, as the rupiah trades near a historic low.
The rupiah has depreciated steadily this year to hit its weakest on Tuesday since an all-time low on April 2025, before recovering slightly. On Wednesday, it had slipped 0.03 per cent by 0230 GMT to trade at 16,865 a dollar.
The fall was in line with regional peers, driven by rising geopolitical tension and market worries about the independence of central banks in some developed countries, an official of Bank Indonesia (BI), Erwin Gunawan Hutapea, said in a statement.
"Bank Indonesia will remain active in the market to ensure the rupiah exchange rate moves in line with fundamental values ​​and sound market mechanisms," Hutapea said, using the central bank's phrase to describe market interventions.
BI has intervened in offshore non-deliverable forward markets in Asia, Europe and America, and in the domestic spot, non-deliverable forward and bond markets, added Hutapea, the head of monetary management at the central bank.
Analysts also flagged domestic concerns about Indonesia's fiscal position, after the government reported a budget deficit of 2.92 per cent of GDP in 2025, among the widest in more than two decades and close to a statutory cap of 3 per cent of GDP.
"Fiscal concerns have amplified the exogenous headwinds already facing the currency this year," DBS economist Radhika Rao said.
She pointed to risks that the fiscal deficit in 2026 might hover around last year's level, wider than the government's current plan of 2.68 per cent.
Bond investors have long worried that President Prabowo Subianto's costly fiscal agenda might swell the budget deficit beyond the legal limit.
Finance Minister Purbaya Yudhi Sadewa told reporters he expected capital inflows to return on Indonesia's strong economic fundamentals, which will support the rupiah in coming weeks.
Purbaya has previously pledged to abide by the fiscal deficit limit this year.
In a move that could bring fresh dollar supply onshore, the finance ministry raised $2.7 billion on Monday from a U.S. dollar-denominated bond sale.
