Why Is Bank Indonesia Upbeat on Rupiah Recovery by July?

TEMPO.CO, Jakarta - Bank Indonesia Governor Perry Warjiyo expressed confidence that the rupiah will regain its footing in July or August 2026, following a sharp decline to the 17,600 per US dollar level. He explained that the current volatility follows a consistent historical pattern observed whenever the currency faces pressure.

"From our experience, I don't want to boast, but I happen to have lived through crisis after crisis. I was there in 1997-1998, in 2008 during the global collapse, and the taper tantrum. The Covid-19 pandemic also had the same effect; the exchange rate pressures generally tend to ease and strengthen in July and August," Perry said during a meeting with Commission XI of the House of Representatives in Senayan on Monday, May 18, 2026.

Perry asserted that the rupiah’s current valuation is lower than its fundamental worth, describing it as undervalued. He referenced the macroeconomic assumptions of the state budget (APBN), which targets an average exchange rate of 16,500, with an upper threshold of 16,800 per US dollar.

He remains confident that the central bank can bring the rupiah back to that target range. According to him, the current weakness of the rupiah is heavily driven by seasonal factors, specifically heightened demand for foreign exchange (forex).

"In April, May, and June, the demand for foreign currency is typically high. We see the impact of the Hajj pilgrimage, dividend payouts, and the settlement of foreign debts," he explained. Therefore, he predicts the rupiah will recover its strength as these seasonal pressures subside in July or August.

However, Perry also acknowledged that exchange rate movements are shaped by a mix of global and domestic drivers. On the global front, he cited the Middle East conflict in February 2026 as a primary catalyst for the rupiah’s depreciation due to heightened geopolitical risks.

Nevertheless, based on historical cycles, the rupiah has shown an ability to bounce back after temporary dips. He pointed to February of last year, when US reciprocal tariff policies emerged; the rupiah briefly touched 17,000 per US dollar before successfully rebounding.

By the close of trading on Monday, May 18, 2026, the rupiah settled at 17,667 per US dollar, shedding 71 points compared to the previous trading day.

Read: Purbaya: Prabowo's Dollar Remarks Meant to Entertain

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