FX.co ★ Rupiah Edges Higher amid Market Reopening and Fiscal Reassurance

The Indonesian rupiah strengthened to below IDR 16,900 per dollar on Wednesday, recovering from a brief decline to 16,930 in the previous session, as the dollar index softened amid reports that the US is seeking talks with Iran to de-escalate tensions in the Middle East. Market sentiment also improved as local trading resumed after a week-long Eid break, buoyed by Finance Minister Purbaya Yudhi Sadewa’s assurance that there are no plans to breach Indonesia’s 3% budget deficit ceiling, with any deviation reserved only for a major crisis.

Nonetheless, rising energy prices are fueling concerns about a potential inflation shock, given Indonesia’s heavy dependence on Middle Eastern oil. In this context, Bank Indonesia is set to introduce new measures on April 1 to curb speculation in the rupiah: foreign-exchange purchases above USD 50,000 will require supporting documentation, and the limit on domestic non-deliverable forward (NDF) sales will be doubled to USD 10 million. The central bank kept its benchmark rate unchanged at 4.75% last week, underscoring its focus on currency and financial stability.