Jakarta. The Indonesian rupiah weakened to its lowest level since the 1998 financial crisis, pressured by renewed global trade tensions and investor concerns over US tariff policies under President Donald Trump.

The rupiah depreciated 0.45 percent to Rp 16,611.5 per US dollar on Tuesday, extending Monday’s 0.4 percent drop. The US dollar index edged up 0.12 points to 104.3, reflecting broad strength in the greenback. Analysts cited growing concerns over Washington’s impending auto tariffs, which Trump signaled would take effect next month, with selective exemptions.

“This reflects the market’s reaction to heightened trade risks,” said Ibrahim Assuaibi, a currency analyst at Laba Forexindo Berjangka. “Investors are recalibrating their positions ahead of the tariff deadline on April 2.”

The rupiah’s slide draws parallels to the 1998 Asian financial crisis, when the currency plunged from about Rp 2,400 per dollar to Rp 16,500 in a matter of months, triggering economic and political turmoil in Indonesia. Today, Indonesia's economic fundamentals and political stability remain strong despite recent widespread protests against the revision of the military law and the ‘Dark Indonesia’ demonstrations over government budget cuts and mass layoffs.

Foreign exchange market analyst and Doo Financial Futures President Director Ariston Tjendra said investor confidence in the domestic stock market is also weighing on the rupiah.

"Investor confidence in the domestic stock market has also put pressure on the rupiah. The market is pessimistic about domestic economic growth, which is reflected in the movement of the Indonesia Stock Exchange (IDX)," he noted in a report on Tuesday.

Bank Indonesia has intervened in the foreign exchange and bond markets, deploying Domestic Non-Deliverable Forward (DNDF) contracts to manage volatility. However, investor confidence remains fragile amid uncertainty over fiscal policy and the global economic outlook.

Indonesia’s economy is facing headwinds from both domestic and international factors. GDP growth is now projected to slow to 4.9 percent in 2025, down from a prior estimate of 5.1 percent, according to Assuaibi. The downward revision reflects weakening investment sentiment and rising trade risks tied to US protectionist measures.

The slowdown has already led to layoffs in labor-intensive industries such as textiles, denting household consumption—a key driver of Indonesia’s economy. 

“The government’s ambitious fiscal expansion under President Prabowo Subianto has sparked concerns, particularly with significant budget cuts in critical sectors such as education and public works,” Assuaibi noted. “This has contributed to a persistent decline in equity markets this month.”

Despite budget cuts to fund various priority programs such as electricity subsidies and free meals for millions of children, Finance Minister Sri Mulyani reported a Rp 31.2 trillion deficit in the 2025 state budget as of February. However, she insisted that Indonesia’s economic fundamentals remain solid and the deficit was under control.

Investors are closely watching trade negotiations, particularly US-Russia talks on a potential ceasefire in Ukraine. While geopolitical developments could bring some relief to global markets, the upcoming US tariff adjustments remain a key risk factor.

Trump’s administration is expected to take a more targeted approach to reciprocal tariffs rather than broad industry-wide levies. Countries with significant trade imbalances with the U.S. are likely to face heightened scrutiny.

“With trade tensions escalating, the rupiah is likely to remain under pressure,” Assuaibi said. “Further volatility is expected as we approach the implementation of new US tariffs.”

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