Indonesia’s Currency Rate to USD reached the highest level in History

On Tuesday, May 12th, 2026, the exchange rate of the Indonesian rupiah to USD peaked at IDR 17,500/USD, reaching the weakest point. Previously, it showed that the dynamic had strengthened slightly and then weakened. Despite external conditions, what are the domestic conditions, including Indonesian economic fundamentals and the stock exchange?

Economic Fundamental

Although Indonesia recorded economic growth of 5.6% in Q1 2026, the budget recorded a deficit of nearly 1% of GDP. Besides, Indonesia had a primary balance deficit of IDR 95,8 trillion or approximately USD 5.47 billion in Q1 2026, which is the difference between total state revenue and state expenditure, excluding the debt interest payment component. The primary balance shows the state’s ability to cover expenditures without incurring interest on debt. Therefore, if the primary balance is in deficit, it means the nation still lacks the capacity to cover its expenditure and interest on its debt.

Indonesia Stock Exchange

Combined Stock Prices Index (IHSG) declined to 1.81% or 123.36 points to 6,734.54 in the 1st session of trade, May 13, 2026. This decline happened after the Morgan Stanley Capital International (MSCI) released the rebalancing report in May 2026.

According to the report, the MSCI removed six Indonesian stocks from the Global Standard Indexes and thirteen from the Global Small Cap Indexes. Many analysts commented that this pressured the IHSG and led to outflows from the stock exchange.

According to the Indonesian Stock Exchange, the outflow in the first trade session reached 1,41 million shares. Most of them are stocks included in the MSCI Indexes.

Monetary Policy

Last time, the Central Bank of Indonesia, which has the task of maintaining the stability of the currency, responded to the decreasing value of the Rupiah with the following 7-step policy, which has been approved by the President :

First, intervening in Non-Deliverable Forward (NDF) either in the foreign and domestic markets.
Second, the Bank of Indonesia and the members of the Financial System Stability Committee agreed to strengthen the capital flow through Sekuritas Rupiah Bank Indonesia (SRBI)/Bank Indonesia Rupiah Securities.
Third, Bank Indonesia will continue to purchase the Government Bonds from the secondary market.
Fourth, BI and the Ministry of Finance must continuously maintain adequate liquidity in the banking and financial markets.
Fifth, BI tightened the rules for purchasing dollars without underlying assets, reducing the limit from US$ 100 thousand per person per month to US$ 50 thousand per person per month.
Sixth, BI will allow domestic banksthat are primary dealers to sell NDFs in overseas markets.
Seventh, BI will increase supervision of banks and corporations with high-dollar purchasing activity.

Indonesia’s FX reserves

Indonesia’s foreign exchange reserves at the end of April 2026 were US$146.2 billion, down from US$148.2 billion at the end of March 2026. This development was influenced by tax and service revenue and the issuance of global government bonds, amid the government’s foreign debt payments and the Rupiah exchange rate stabilization policy. This policy is Bank Indonesia’s response to increasing global financial market uncertainty.

The foreign exchange reserves position at the end of April 2026 was equivalent to financing 5.8 months of imports or 5.6 months of imports and servicing government external debt, and well above the international adequacy standard of approximately 3 months of imports. Bank Indonesia assesses that these foreign exchange reserves can support external sector resilience and maintain macroeconomic and financial system stability.

Based on these domestic conditions, what do you think? And what should the government do?

Reference:

Featured image: https://insight.kontan.co.id/news/tekanan-berlapis-membayangi-nilai-tukar-rupiah

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