April 8, 2025
JAKARTA – Bank Indonesia (BI) has vowed to “intervene aggressively” in the domestic market after the rupiah plunged to another new multi-year low on Monday, following United States President Donald Trump’s sweeping tariff plans that hammered global financial markets.
The rupiah traded at Rp 17,217 per dollar momentarily before it rebounded to around Rp 16,800 against the greenback on Monday, Bloomberg data shows. At one point on March 25, the rupiah also tumbled to Rp 16,642 per dollar, its weakest since the Asian Financial Crisis in 1998.
BI held a meeting on the same day, responding to the plummeting rupiah by preparing several measures to stabilize the currency and maintain market confidence. The Indonesian Stock Exchange (IDX) is scheduled to reopen on Tuesday after an 11-day break for the Nyepi and Idul Fitri holidays.
On Monday’s meeting, the central bank said it would continuously intervene in the offshore markets in Asia, Europe and New York, as well as in the domestic foreign exchange markets when they reopen on April 8, spokesperson Ramdan Denny Prakoso said in a statement on Monday.
Ramdan stated that BI would also buy government bonds in the secondary markets. “Bank Indonesia will also optimize the rupiah liquidity instruments to ensure adequate liquidity in the money market and with domestic banks,” he stated.
The country’s foreign reserves had fallen to US$154.5 billion in February from $156.1 billion in the previous month, partly because of the central bank’s intervention in the first few months of this year.
BI attributed the depreciating rupiah to the recent reciprocal tariff imposed by Trump and China’s retaliation to the policy that had caused global financial market turbulence, which increased capital outflow and weakened currency rates in emerging markets.
The reciprocal tariffs target nations the US has large trade deficits with, including Indonesia.
Indonesia’s government responded by seeking ways to negotiate with the US administration, saying that it will not retaliate in a bid to ease the import tariff.
Read also: Indonesia prepares to respond to US tariffs
Currency market analyst Ariston Tjendra noted that the market was still waiting for Trump’s response in the negotiation process, saying that Trump’s leniency could bring positive sentiment over assets with higher risks, such as those in emerging markets, which could also uplift the rupiah against the greenback.
“As long as negative sentiment remains, there is a potential of the [rupiah] facing a market test to [depreciate further to] Rp 17,000,” he said to The Jakarta Post on Monday.
“Markets are concerned about global uncertainty, [higher risk assets] will decline because of trade wars, leading market players to save their assets and quit risky assets for safe havens,” he said.
Ariston also attributed the recent US Nonfarm Payrolls data that showed improved employment numbers, which strengthened the dollar against other currencies including the rupiah.
Strong US job growth would indicate a robust US economy, reducing expectations of Federal Reserve (Fed) interest rate cuts, making the dollar more attractive than other currencies.
Meanwhile, investors have been flocking to safe-haven currencies such as to the Japanese yen and Swiss franc, whose value strengthened on Monday following defiance from US officials that indicated negotiations for any tariff reductions will be prolonged, according to Bloomberg.
The Japanese yen was up 1 percent to 145.41 per US dollar and the Swiss franc climbed 0.7 percent as risk-off sentiment extended into a second week.
Read also: Rupiah drops to multiyear low ahead of Trump’s tariffs, domestic uncertainty
Center of Economic and Law Studies (CELIOS) executive director Bhima Yudhistira told the Post on the same day that the rupiah could continue plummeting to around Rp 17,200 to Rp 17,800 per dollar.
He suggested the utilization of foreign exchange reserves at around US$15 billion to $20 billion for currency stabilization to hold the rupiah remain under Rp 18,000 per dollar.
Furthermore, he expects that the rupiah will be under significant pressure when the country’s stock market reopens on April 8, particularly because of selloffs from foreign investors that will lead Indonesia’s stock market to tumble, driven by concerns about the outlook in the domestic economy amid Trump’s tariffs.
Sectors that will be heavily affected by the tariffs mainly include electronics, clothing, footwear, crude palm oil (CPO), nickel and coal, he said, adding that the Indonesia’s commodity exports had experienced a sharp decline, such as coal and nickel, which fell 22.4 percent and 11 percent year-on-year (yoy) respectively.
“With expected low commodity demand because of trade wars, investors are adjusting asset allocations in their portfolios,” Bhima said, implying Indonesia’s continued reliance on natural resources to maintain its economy.
Bhima went on to say that domestic factors also played a major role in weakening the rupiah, citing political turmoil that led to protests like the new Indonesian Military (TNI) Law, as well as concerns about the country’s fiscal condition following the establishment of sovereign fund Danantara, the costly flagship free nutritious meal program and declining state revenue.