MELBOURNE – The Indonesian rupiah declined to its weakest level since the Asian financial crisis as fears mounted over the nation’s fiscal trajectory, putting pressure on the central bank to step up efforts to defend the currency.
The rupiah fell 0.5 per cent to 16,642 against the US dollar on March 25, its weakest since June 1998. The currency has slumped more than 3 per cent in 2025, making it one of the worst performers in emerging markets.
The rupiah has also slumped against the Singapore currency, down about 6 per cent so far in 2025. It was trading at 12,415.58 per Singapore dollar at 11.46am on March 25, down 0.2 per cent overnight.
Bank Indonesia is intervening in the spot foreign exchange, domestic non-deliverable forwards and bond markets to stabilise the rupiah, the central bank’s director for monetary management and asset securities Fitra Jusdiman said in a text message on March 25. The central bank is intervening “boldly and measuredly” to ensure balanced FX supply and demand, and maintain confidence in the domestic market, Mr Jusdiman wrote.
The central bank attributed the rupiah’s weakening mainly to global uncertainties, including Donald Trump’s tariffs and a potentially more hawkish Federal Reserve, Mr Jusdiman added.
Indonesia, one of the region’s darlings just a year ago, is fast losing its appeal with global investors as concerns grow over President Prabowo Subianto’s moves to chip away at the nation’s long-established economic guard rails, and expand the role of the military in civil society.
His populist policy steps since taking office in October, including a roughly US$30 billion (S$40 billion) a year free lunch programme, are pushing the budget deficit closer to its legal limit of 3 per cent of gross domestic product.
“Fiscal worries will likely weigh on the currency” as well as seasonal dividend payment repatriation by foreign investors, said Bank of Singapore strategist Moh Siong Sim.
“Expect Bank Indonesia to continue to curb excessive rupiah volatility ahead of likely April 2 tariff announcement by the US.”
The rupiah’s sell-off followed a rout in the nation’s stocks that has triggered outflows of more than US$2 billion from global funds. Indonesian bonds have also underperformed US Treasuries this year.
While the benchmark Jakarta Composite Index was up 1 per cent at midday on March 25, it remains one of the world’s worst-performing gauges.
Pressure on the rupiah is unlikely to ease near term as traders position for next week’s US tariff announcement. Caution has also set in ahead of a long festive holiday that starts from March 28 through April 7.
“Jittery equities market, ongoing concern on deficit trajectory and the holidays ahead might exacerbate near-term rupiah volatilities,” said Wee Khoon Chong, senior APAC market strategist at BNY. “Investors who are worried on near-term tariff-related pressure might decide to sell now ahead of holidays.” BLOOMBERG
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