Jakarta. Bank Indonesia (BI) said it would not repeat the mistakes of the 1998 and 2008 crises by aggressively defending the rupiah, even as the currency weakened past Rp 17,600 per US dollar on Monday.

Governor Perry Warjiyo said the central bank learned hard lessons from the 1997-1998 Asian financial crisis and the 2008 global financial crisis, when heavy intervention to defend the rupiah ended up tightening liquidity conditions in the domestic market.

“We learned from the 1997-1998 and 2008 crises that excessive intervention to stabilize the rupiah could drain liquidity. It may stabilize the currency, but it also creates liquidity shortages,” Perry told a hearing with House Commission XI on Monday.

Rather than relying solely on spot market intervention, Perry said BI is now using a more measured strategy by combining foreign exchange operations with purchases of government bonds, or SBN, in the secondary market.

The central bank has bought Rp 133 trillion ($7.52 billion) worth of government bonds (SBN) in the secondary market year-to-date to stabilize the bond market and prevent government bond yields from rising too sharply.

Perry said BI currently holds around Rp 1,700 trillion in SBN holdings, allowing the central bank to manage capital flows while maintaining market stability.

“We hold Rp 1,700 trillion in SBN. We sell short-term bonds to generate inflows, while buying long-term yields,” Perry said.

According to Perry, the strategy also helps BI conserve foreign exchange reserves amid mounting global pressure. He warned that excessively high bond yields could trigger capital outflows, making it crucial for the central bank to balance exchange rate stability with market liquidity.

Beyond the bond market, BI is also supporting domestic liquidity by maintaining double-digit growth in base money. The central bank has additionally capped US dollar purchases at $25,000 per person per month to help contain demand for foreign currency.

Despite the rupiah pressure, Perry maintained an optimistic outlook, saying Indonesia’s economic fundamentals remain solid.

“God willing, things will improve going forward. Indonesia’s prospects are good, its fundamentals are strong. We must remain confident,” he said.

Perry stressed that BI measures rupiah stability not merely from the exchange rate level, but also from its volatility. He said that rupiah volatility stood at 5.4% year-to-date, which BI still considers relatively stable.

“We checked the year-to-date volatility, and it stands at 5.4%, which is still relatively stable. Again, the law mandates us to maintain rupiah stability. Stability is not just about the level, but also about how large the fluctuations are,” Perry said.

Referring to historical patterns, Perry said rupiah pressure typically intensifies between April and June due to seasonal demand for US dollars. However, BI expects the rupiah to strengthen again starting in July and August 2026.

“By July and August, the rupiah should strengthen again. We still believe the exchange rate for the full year will remain within the Rp 16,200-Rp 16,800 range,” Perry said.

The rupiah closed sharply weaker on Monday amid a wave of negative global sentiment, including a stronger US dollar, rising energy inflation, expectations surrounding the Federal Reserve, and escalating geopolitical tensions.

Bloomberg data showed the rupiah fell 71 points, or 0.4%, to Rp 17,668 per US dollar in the spot market, while the dollar index slipped 0.07% to 99.21.

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