Economist: The Rupiah is pressured to approach Rp17,000 per US Dollar, BI needs to strengthen foreign exchange management

Global Markets Economist Maybank Indonesia Myrdal Gunarto views that Bank Indonesia (BI) needs to strengthen the management of foreign exchange supply (foreign exchange) in the domestic foreign exchange market as a response to the weakening of the rupiah exchange rate to near Rp17,000 per US dollar.

Myrdal assessed that the pressure on the rupiah was mainly triggered by the imbalance between the supply and demand for dollars in the country.

In terms of demand, according to him, foreign exchange needs are still relatively consistent, especially from importers and foreign debt payment obligations. If there is an increase, the increase is still considered seasonal at the beginning of the year.

On the other hand, foreign exchange supply in the domestic market is relatively limited. Myrdal suspects that this is because exporters, especially exporters of non-oil and gas natural resources, have not optimally converted their export earnings into rupiah.

This condition causes inequality between the availability of dollars and domestic foreign exchange needs, so that dollars tend to strengthen and the rupiah is depressed.

"That is if you look at it from our side (domestic factors). Because, in my opinion, our fundamental factors actually lead to a condition where the rupiah should strengthen against the dollar. But this is happening the other way around," he said, quoted by Antara, Tuesday, January 20.

Therefore, according to Myrdal, the central bank needs to encourage an increase in foreign exchange supply in the domestic market, one of which is through an appeal to exporters to immediately convert export dollars into rupiah.

In this case, the government's role is also considered important to strengthen policies that encourage the circulation of foreign exchange in the country.

"The weakening of the rupiah currently occurs in the midst of inflows flowing into our financial markets. And it also occurs in the midst of a trade balance that is surplus for 67 consecutive months, as well as a current account balance with its position as of the third quarter (2025) surplus," said Myrdal.

In addition, he added, BI must also continue to carry out interventions as a stabilization measure, including through the secondary government securities (SBN) market, the spot rupiah market, NDF (non-deliverable forward) and DNDF (domestic non-deliverable forward) instruments, as well as foreign exchange swap transactions.

When contacted separately, the Head of the Center for Macroeconomics and Finance of the Institute for Development of Economics and Finance (Indef) M Rizal Taufikurahman also had a similar view. According to him, from the perspective of policy responses, exchange rate stabilization is not enough if it only relies on intervention in the spot market.

"Data shows that when pressure comes from short-term capital flows, the effectiveness of conventional interventions is limited. Therefore, a more appropriate approach is a combination of interventions in the spot market, foreign exchange derivative instruments, as well as stabilization of the bond market to contain volatility and maintain investor confidence," explained Rizal.

"Beyond that, he added, strengthening the supply of domestic foreign exchange, especially through the optimization of export earnings (DHE), needs to continue to be strengthened so that the stability of the rupiah does not entirely depend on foreign capital flows.

According to Rizal, the weakening of the rupiah, which is moving close to Rp17,000 per US dollar, currently reflects more global cyclical pressures than the deterioration of domestic economic fundamentals.

Data-wise, he explained, the strengthening of the US dollar is still supported by high US Treasury yields and expectations of global interest rates that last longer. The impact is not only felt in Indonesia, but also puts pressure on the majority of emerging market currencies in Asia.

However, the rupiah is indeed relatively more sensitive because the structure of the domestic financial market is still quite open to foreign portfolio movements, so that changes in global sentiment are quickly reflected in the exchange rate.

"However, this weakening cannot be categorized as a signal of a crisis, as long as it remains within a controlled range of volatility. Domestic inflation is still within target, the external balance is relatively solid, and foreign exchange reserves are at an adequate level to dampen short-term turmoil," said Rizal.

He added that the current exchange rate pressure is more sourced from market psychological factors and portfolio adjustments, not from structural economic imbalances.

The new policy alarm is considered really relevant if the depreciation continues and begins to spread to inflation expectations, debt financing costs, or financial sector stability.

"The opportunity for stabilization and even strengthening the rupiah remains open, but it is not automatic," said Rizal.