The Indonesian rupiah strengthened to below IDR 17,800 per U.S. dollar on Thursday afternoon after Bank Indonesia raised its benchmark interest rate by 25 basis points to 5.75%, in line with market expectations. The move followed a surprise off-cycle hike just a week earlier, bringing cumulative tightening to 100 basis points over three increases in the past four weeks, as the central bank aims to bolster the rupiah and curb inflation risks linked to the Middle East conflict.
The decision also came as the U.S. Federal Reserve left its own benchmark rate unchanged while signaling that additional tightening remains on the table. The rupiah has been one of Asia’s weakest-performing currencies this year, weighed down by higher energy prices driven by geopolitical tensions and persistent concerns over domestic policy direction. Governor Perry Warjiyo said the rupiah is expected to appreciate over time, supported by attractive yields, a deepening domestic financial market, and resilient economic growth.