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Rupiah Approaching 17,000: What's Happening?

The recent depreciation of the rupiah is occurring amid a combination of fairly strong global factors, particularly the strengthening of the US dollar and increased caution among global investors towards risky assets.

Key Factors
- Global risk sentiment
Geopolitical uncertainty and international market volatility are prompting global investors to tend to seek assets considered safer, such as the US dollar.
- The Fed's policy direction
Uncertainty regarding future US interest rate steps is making global markets more defensive, which typically has a direct impact on emerging market currencies.
- Regional Asia trends
The rupiah's movement aligns with the weakening of several other Asian currencies, such as the Korean won and Philippine peso, which are also pressured by the strength of the dollar.

Authorities' Perspective: Still Manageable

The government and Bank Indonesia have affirmed that the current rupiah movement remains within controlled limits.
Finance Minister Purbaya Yudhi Sadewa expressed confidence that the rupiah has the potential to strengthen again in the near term, in line with improvements in economic fundamentals and policy support.

Bank Indonesia's Approach
BI's response is proactive and multi-pronged, including:
- Intervention in onshore and offshore markets to maintain stability
- Utilisation of foreign exchange reserves as a buffer
- Policy coordination with the government to maintain market confidence
This approach aims to ensure the rupiah does not move too far from its fair value due to short-term pressures.

What is the Impact on the Economy?

In the authorities' assessment, the current rupiah depreciation has not yet shown significant impacts on real economic activity. Domestic fundamentals are considered to remain relatively solid, with growth prospects still on track.

Purbaya also noted optimism that Indonesia's economic growth could approach 6% in 2026, as reforms continue and policy support persists.

Interesting Phenomenon: Rupiah Weakens, IHSG Stays Strong

Historically, a weaker rupiah has often been a headwind for the stock market. However, this time Indonesia is actually showing a different pattern: the rupiah approaching 17,000 per dollar, whilst the IHSG remains resilient at high levels with foreign fund flows still recording net purchases.

What's Driving This Divergence?
1. Stocks Becoming More