The Indonesian rupiah weakened to around IDR 17,850 per U.S. dollar on Friday, easing from about IDR 17,700 in the previous session, as the U.S. dollar index hovered near its strongest level since May 2025 amid expectations of a Federal Reserve rate hike later this year. Sentiment was also pressured by caution ahead of MSCI’s review next week on a potential downgrade of Indonesia to frontier market status, a move that could trigger renewed capital outflows. At the same time, fiscal concerns persisted despite the government’s decision to cut funding for the flagship Free Meal Program and suspend it during school holidays.
Even so, the rupiah is up about 0.6% for the week and is on track for a second consecutive weekly gain, underpinned by Bank Indonesia’s hawkish policy stance, which has delivered a cumulative 100 basis points of rate hikes since May. In a further effort to bolster currency stability, the central bank tightened foreign-exchange regulations, lowering the documentation threshold for outward transfers to USD 25,000 from USD 50,000 and cutting the ceiling for cash purchases of foreign currency to USD 10,000 from USD 25,000, effective July 1.