Jakarta. Bank Indonesia reaffirmed its commitment to keeping the rupiah stable as the currency hovers near its lowest level on record amid ongoing global market pressures.

Erwin G. Hutapea, head of BI’s Department of Monetary and Securities Asset Management, said global factors have weighed on currencies worldwide, including the rupiah, at a time when domestic demand for foreign exchange typically rises at the start of the year.

“The pressures stem from escalating geopolitical tensions, concerns over central bank independence in several advanced economies, and uncertainty over the Federal Reserve’s policy direction, amid higher domestic foreign-exchange needs early in the year,” Erwin said on Wednesday.

The rupiah is now trading about 0.5% away from its weakest level on record, last touched in April 2025. Market unease has been amplified by fiscal data showing Indonesia’s 2025 budget deficit reached 2.92% of gross domestic product, nearing the legal ceiling of 3%.

Erwin said the rupiah closed at Rp 16,860 per dollar on Tuesday, down 1.04% year to date. Still, he said the currency’s performance remains broadly in line with regional peers facing similar global headwinds, with South Korea’s won down 2.46% and the Philippine peso weakening 1.04% over the same period.

“Despite the depreciation, the rupiah’s movement remains consistent with regional currency trends affected by global sentiment,” Erwin said.

He said Bank Indonesia remains focused on keeping the rupiah stable to support the economy. To do this, the central bank has stepped into currency markets at home and abroad, including buying and selling rupiah, using hedging instruments, and purchasing government bonds to calm market swings.

Those efforts have been supported by continued foreign capital inflows, particularly into Bank Indonesia Rupiah Securities (SRBI) and the equity market, which recorded net inflows of Rp 11.11 trillion in January 2026. Investor confidence in Indonesia remains positive, Erwin said, pointing to the country’s five-year credit default swap (CDS) premium, which is hovering at a relatively low level of around 72 basis points.

Indonesia’s external buffers also remain solid. Foreign exchange reserves stood at $156.5 billion at the end of December 2025, equivalent to 6.4 months of imports, providing an adequate buffer against global financial market shocks.

“Bank Indonesia will remain present in the market to ensure the rupiah moves in line with its fundamentals and healthy market mechanisms,” Erwin said, adding that the central bank will continue to optimize pro-market monetary operations to strengthen policy transmission and ensure sufficient liquidity while meeting inflation targets.

Separately, the National Economic Council (DEN) attributed the rupiah’s recent weakness to heightened capital outflows from domestic financial markets, compounded by larger-than-usual foreign currency usage toward the end of 2025.

“At year-end there was higher foreign exchange usage than usual. The question is whether this is purely a seasonal factor or whether there are confidence issues that need to be addressed,” said DEN Vice Chair Mari Elka Pangestu. “The government’s task now is to maintain confidence.”

Mari Elka said efforts to curb capital outflows must go hand in hand with boosting investment activity. Stronger foreign direct investment, she argued, would help support the rupiah and the broader economy, particularly amid prolonged geopolitical and geo-economic tensions that could trigger investment relocations.

Market data showed the rupiah strengthening modestly on Wednesday. As of 9:02 a.m. Jakarta time, the currency had risen 0.11% to Rp 16,868 per dollar, according to Bloomberg, after closing weaker at  Rp 16,877 on Tuesday. The dollar index was up 0.09% at 99.22.

Analysts said the rupiah also drew support from softer-than-expected US inflation data. Core US consumer prices rose 0.2% in December and 2.6% year on year, reinforcing expectations that the Federal Reserve could cut interest rates twice in 2026.

Despite ongoing pressures, Mari Elka said the rupiah’s depreciation remains within manageable limits compared with other countries, though she cautioned that prolonged weakness could eventually weigh on fiscal performance, particularly through higher fuel subsidy costs and foreign-currency-denominated debt servicing.

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