Jakarta. The rupiah has entered a phase of excessive depreciation and is now trading significantly weaker than what Indonesia’s long-term economic fundamentals would justify, according to an economist.

Fakhrul Fulvian, chief economist at Trimegah Sekuritas Indonesia, said on Thursday that market perceptions of the rupiah are now shaped not only by economic fundamentals but also by a combination of global pressures, domestic policy direction, and uncertainty surrounding Indonesia’s economic adjustment process.

“Financial markets do not only read today’s data. Markets read policy direction, the credibility of the response, and a country’s ability to maintain stability amid very rapid global changes,” Fakhrul said.

The rupiah traded at around Rp 17,858 per US dollar on Thursday, significantly weaker than the government’s 2026 state budget assumption of Rp 16,500 per dollar.

According to Fakhrul, the currency is currently facing pressure from multiple fronts simultaneously.

Under normal conditions, when global energy prices rise, the economic impact is typically distributed across inflation, fiscal balances, domestic prices, and exchange rates. However, because domestic price adjustments are being managed cautiously to preserve social stability and purchasing power, a disproportionate share of the pressure has shifted to the rupiah, he said.

“The rupiah has ultimately become the main shock absorber. Inflation is being contained, energy prices are being held down, but the economic pressure has not disappeared. That pressure has shifted into the rupiah exchange rate,” Fakhrul said.

He said the government is facing a difficult dilemma between protecting household purchasing power and maintaining external stability.

Efforts to prevent increases in subsidized energy prices may be understandable from a social and political perspective, but the consequence is that economic pressure becomes concentrated in financial markets.

“If domestic prices are kept rigid while global pressures continue to rise, then the foreign exchange market becomes the area that moves most extremely,” he said.

Fakhrul warned that if the rupiah continues to function as the sole economic shock absorber, the pressure could eventually spread to bond yields, funding costs, investment activity, and broader economic growth.

He said the situation could not be addressed through a single policy measure alone and called for more credible and realistic monetary and fiscal policies.

“In my view, the current rupiah level is excessively weak compared with Indonesia’s actual economic capacity,” Fakhrul said.