Jakarta. Rupiah strengthened at the start of the week on Monday, even as global geopolitical and trade tensions continued to unsettle financial markets.

The currency closed 38 points higher against the US dollar in Monday afternoon trade, after earlier gaining as much as 50 points to Rp 16,782, compared with the previous close of Rp 16,820.

Ibrahim Assuaibi, director at Traze Andalan Futures, said the rupiah’s appreciation came despite heightened global uncertainty, including rising tensions between the United States and NATO members over Greenland.

“Trump’s rhetoric on the strategic importance of the Arctic region has strained transatlantic relations, raising concerns over broader diplomatic and economic repercussions,” Ibrahim said in a written statement on Monday.

At the same time, trade tensions intensified after US President Donald Trump announced a 100% import tariff on Canadian goods, following a separate trade agreement with China. However, market participants appeared to look past the near-term risks, focusing instead on broader monetary policy expectations.

The rupiah also drew support from anticipation surrounding US monetary policy, with the Federal Reserve set to conclude its policy meeting later this week. Markets widely expect the central bank to keep interest rates unchanged.

“While a pause is largely priced in, investors will closely scrutinize the Fed’s statement and comments from Chair Jerome Powell for clues on the timing and pace of potential rate cuts later this year,” Ibrahim said.

Domestically, sentiment toward the rupiah improved amid confidence in Bank Indonesia’s commitment to maintaining currency stability.

Economist Syafruddin Karimi of Universitas Andalas said the government and Bank Indonesia must treat market movements as an early warning system rather than a disturbance.

“The market is not creating disruption; it is assessing policy credibility,” Syafruddin said on Sunday. “The government needs to lock in regulatory consistency, deliver final decisions, streamline communication, and close the space for rumors through swift, data-based clarification.” He added that Bank Indonesia must safeguard its credibility through professional and transparent decision-making while reinforcing foreign exchange market stabilization.

“Market participants are always free to assess and have tools to discipline policy. The cheapest way to maintain stability is to reduce uncertainty,” Syafruddin said. “If certainty improves, the risk premium will fall. The rupiah will stabilize, yields will decline, and the cost of growth will ease.”

Bank Indonesia has held its benchmark interest rate at 4.75%, while foreign exchange reserves stood at $156.5 billion at the end of 2025. “The issue is not a lack of monetary ammunition,” Syafruddin said. “The problem lies in a rising risk premium driven by uncertainty.” According to him, investors continuously price risk, using exchange rates and bond yields as the clearest signals of policy credibility. “When policy is consistent, markets lower the risk premium. When policy wavers, markets raise it. This mechanism works without speeches, meetings, or compromise,” he said.

Syafruddin also warned that governance-related issues have contributed to the rise in risk premiums. Bond yields peaked on the day news emerged about the nomination of a politically connected figure to a strategic position at Bank Indonesia, reinforcing market concerns over central bank independence.

“Investors do not wait for actual intervention. They only need to see the risk of a policy shift, then they demand higher yields and reduce exposure to the rupiah,” he said.

Beyond sentiment, he noted that transactional pressures also matter, as large-scale demand for foreign currency can strain the market if corporations fail to manage purchase schedules and hedging properly.

“At this point, exchange rate stability cannot rely on intervention alone; it requires disciplined foreign exchange risk management,” Syafruddin said.

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