DIGIVESTASI - Rupiah Depreciates, Surges to IDR 16,300 per US Dollar, The Indonesian Rupiah (IDR) continues to weaken significantly against the US Dollar. From a position around IDR 15,900 on December 13, 2024, the Rupiah has now depreciated to the level of IDR 16,300 per US Dollar. According to Refinitiv data, as of trading on Wednesday (December 19, 2024), the Rupiah weakened by 1.24% to IDR 16,285 per US Dollar, marking its steepest drop since October 7, 2024, when it fell by 1.26%.

Throughout trading, the Rupiah fluctuated, hitting a low of IDR 16,130 per US Dollar and peaking at IDR 16,300. This decline is the sharpest since late July 2024, when the exchange rate hit IDR 16,295 per US Dollar.

Bank Indonesia’s View on Rupiah Weakness

Bank Indonesia Governor Perry Warjiyo attributed the weakening to heightened global uncertainty. Perry highlighted influences from U.S. economic policy under President-elect Donald Trump, the limited rate cuts by the Federal Reserve, the strengthening of the US Dollar globally, and geopolitical risks.

“Global uncertainties are affecting the Rupiah’s exchange rate movements,” Perry stated in an official release following BI’s Board of Governors Meeting on Wednesday (December 19, 2024).

Despite the challenges, Perry noted that the Rupiah remains relatively stable compared to other currencies, such as the Taiwanese Dollar, Philippine Peso, and South Korean Won. He expressed confidence that the exchange rate will stabilize due to Indonesia’s solid economic outlook, controlled inflation, and BI’s commitment to maintaining Rupiah stability.

Domestic Sentiments: Corruption Allegations at BI

In addition to external factors, domestic issues have added pressure on the Rupiah, including market sentiment following the raid of Bank Indonesia's headquarters by the Corruption Eradication Commission (KPK) on December 16, 2024, regarding allegations of corruption related to CSR funds. Responding to the issue, Perry emphasized BI’s commitment to maintaining exchange rate stability, including market interventions.

“We will continue to maintain the stability of the Rupiah’s exchange rate, including through monetary operations and BI Rupiah Securities instruments,” Perry stated firmly.

Key External Factors Impacting the Rupiah

Analysis from CNBC Indonesia identifies several major external factors influencing the Rupiah’s decline:

1. Limited US Interest Rate Cuts
   The Federal Reserve is expected to make only two rate cuts in 2025, down from previous predictions of more significant reductions. Fed Chairman Jerome Powell stated that current interest rate policy is already accommodative, and future adjustments will be approached cautiously.

   Myrdal Gunarto, a Global Markets Economist at Maybank Indonesia, noted that this shift in expectations makes the Rupiah’s decline understandable. "The expectation for a 100-basis-point cut has now turned into just 50 bps, putting pressure on the Rupiah," he explained.

2. Rising Inflation in the U.S.
   The U.S. Producer Price Index (PPI) for November 2024 rose higher than expected, at 3% year-on-year (yoy). This has increased pressure on the Rupiah, as higher inflation can lead to tighter interest rate policies by the Fed, strengthening the US Dollar further.

3. Increased U.S. Treasury Yields
   Yields on U.S. Treasury bonds have risen significantly for the 2-year, 5-year, and 10-year tenors, recorded at 4.355%, 4.383%, and 4.498%, respectively. Rising yields attract investors to dollar-based assets, consequently weakening currencies like the Rupiah.

Capital Flows and Geopolitical Risks

Foreign capital flows have shown an outflow trend in Indonesia. Bank Indonesia data recorded net sales of IDR 1.31 trillion in the stock market during December 9–12, 2024, although investors still posted a net purchase of IDR 8.84 trillion in the government bond (SBN) market.

Senior Economist at KB Valbury Sekuritas, Fikri Permana, highlighted the potential for further capital outflows due to fragmented global economic conditions, exacerbated by Trump-era tariffs and global investors preferring safer portfolios in the United States. “This condition is further aggravating the Rupiah’s depreciation,” he stated.

Conclusion

The weakening of the Rupiah is driven by a combination of global and domestic factors, including expectations around Fed policies, high US inflation, rising bond yields, and local sentiment related to governance issues. Nevertheless, Bank Indonesia remains optimistic about maintaining Rupiah stability through intervention measures and prudent monetary policies.

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