Name: Indonesian rupiahs hits record low
Uploaded: 2026-01-20T14:50:23.513Z
Duration: 2 min 41 s
Description: The Indonesian rupiah has hit a record low against the U.S. dollar over concerns around central bank independence and policy direction. Mitul Kotecha, Head of Asia FX at Barclays, shares why he expects some stabilization ahead for the currency.

The Indonesian rupiah has hit a record low against the U.S. dollar over concerns around central bank independence and policy direction. Mitul Kotecha, Head of Asia FX at Barclays, shares why he expects some stabilization ahead for the currency.

Jakarta

The Indonesian rupiah has fallen to a record low, with markets closely monitoring the 17,000 level against the US dollar. Bank Indonesia has previously used multiple interventions to defend the currency and retains resources to do so, though several DNDF maturities are due soon.

Market sentiment has worsened due to concerns about Indonesia's fiscal position, as the deficit approaches 3% of GDP. While a rapid recovery in the rupiah is possible if fiscal credibility improves, investors are focusing on Bank Indonesia's upcoming policy decision, with no policy easing expected given current currency weakness.

Indonesian rupiah's hits record low

we've heard also from Bank Indonesia, its job is to defend the stability of the currency. But in this case, does the message really need to come from Bank Indonesia or does it need to come from President Prabowo, maybe rethinking this move? At the moment, clearly, as you said, the rupiah is under pressure and everyone is watching the 17,000 level. In the past, Bank Indonesia has been able to defend the rupiah fairly well if it needs to via its triple interventions, the NDF, DNDF and spot interventions and still has ammunition to do that, although there are a number of DNDF maturities this week. And clearly, look, the messaging markets are focusing on the fiscal picture in Indonesia and what this means. As you also allude to, there's questions on BI as well. But sentiment has worsened in this respect. But again, we don't think the rupiah is going to slide from here. And as I mentioned, there could still be a lot of defence around this 17,000 level. But we will be watching for fiscal developments. Only recently did we hear that the deficit now is close to 3% of GDP. We're not expecting a shift in the target or a sustained breach of this level. But it does obviously send signals that there has been some deterioration on the fiscal front. So, I think this is, again, worth watching. And clearly, sentiment for the rupiah will also depend on that. On the other hand, Indonesia has already seen a rapid outflow of foreign investors from the bond market in recent years. So, the foreign share of bond holdings is already quite low. So, in that sense, you're probably not going to see a huge amount of pressure coming from foreign outflows on the bond market. To your point, given the broader macro story around Indonesia at the moment, how likely is it that we could see a very rapid reversal of today's decline? Could it go back up again as quickly as it sank? It certainly can. I think, as you said, the global environment is still very mixed. I think Asian markets are trading very idiosyncratically at the moment. If we do start to see some better news on the fiscal front, if there's some improvement in terms of overall foreign confidence towards our fiscal credibility, I think this will be very, very important. Of course, obviously, there will be focus on Bank Indonesia. There's a policy decision this week. We don't expect BI to ease policy given the weakness in the currency. But it will be very important to see what Bank Indonesia tells us this week about its policy stance and where it sees policy going forward and the outlook there. And I think the investors will focus on that next.

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