FX.co ★ Rupiah Weakness Persists as Buffers Strain

The Indonesian rupiah remained under pressure on Thursday, trading just above the psychological threshold of IDR 17,000 per dollar and extending its recent decline. The currency’s weakness was largely driven by a firm U.S. dollar, supported by persistent geopolitical tensions after President Donald Trump signaled the possibility of further military action against Iran. On the domestic front, Indonesia’s external buffers showed signs of strain as the trade surplus narrowed in February, reflecting subdued exports alongside solid import growth. Market caution also intensified ahead of next week’s release of March foreign exchange reserves, following a decline in February that pushed reserves to a three-month low. Although annual inflation eased to 3.48% in March, returning to Bank Indonesia’s target range, elevated oil prices and ongoing geopolitical risks continue to pose upside risks to inflation. At the same time, fiscal pressures are mounting due to sustained energy costs and President Prabowo’s flagship programs. In response, Bank Indonesia has introduced new measures to curb speculative activity in the currency market, underscoring its commitment to prioritizing rupiah stability.