In the evolving landscape of currency markets, MUFG Bank Ltd. has forecasted that the Indonesian rupiah may depreciate to 17,100 per dollar in the near future. Meanwhile, Barclays Bank Plc anticipates the currency could approach 17,200 by the first quarter of 2026, contingent on interventions from Bank Indonesia. As of Monday, the rupiah closed at 16,805, marking it as the sole major Asian currency to face a decline against the dollar this year.
The Impact of Political Policies on the Rupiah
Concerns surrounding President Prabowo Subianto’s fiscal strategies are contributing to the rupiah’s downward trend. This situation is exerting significant pressure on the central bank, which must navigate the dual objectives of supporting the currency while maintaining low interest rates to encourage economic growth.
- Key Points:
- The rupiah closed at 16,805 on Monday.
- It reached a record low of 16,957 on April 9.
- Analysts predict intervention if the rupiah falls below 17,000.
Expert Insights on Currency Stability
Both Josua Pardede, chief economist at PT Bank Permata, and Hosianna Evalita Situmorang from PT Bank Danamon, suggest that Bank Indonesia is likely to step in if the rupiah weakens beyond the 17,000 mark. Pardede warns that breaching this level could incite market panic, leading to increased capital outflows and further depreciation of the currency.
The Balancing Act of Bank Indonesia
A weakening rupiah poses risks of accelerating capital outflows, but efforts to stabilize it could deplete the central bank’s foreign reserves. Currently, Bank Indonesia boasts a record high in reserves, bolstered by robust tax revenues and the reduction of government foreign loans.
- Strategic Approaches:
- Leaning on reserves for market stabilization.
- Utilizing domestic non-deliverable forwards to manage volatility.
- Allowing for some currency adjustments to maintain balance.
Future Projections
According to Karinska Salsabila Priyatno, an analyst at PT Mirae Asset Sekuritas Indonesia, the central bank is likely to rely heavily on its reserves and other tools to mitigate volatility, all while accepting a certain level of currency fluctuation. The coming months will be crucial as Bank Indonesia navigates these challenges in a complex economic environment.
In summary, the outlook for the rupiah remains uncertain, with key political decisions and central bank strategies shaping its trajectory in the months ahead.
