THE rupiah exchange rate has weakened to an alltime low. Before rising to below Rp 18,000 per USD, it plunged to Rp 18,190 per USD on June 8, 2026. The rupiah rebounded after Bank Indonesia (BI) went all-out to save the rupiah through open market operations, foreign exchange market intervention, and interest rate policies. During the first five months of 2026, foreign exchange reserves were depleted by USD 11.5 billion, reaching USD 144.9 billion at the end of May 2026, and are expected to decrease by another USD 2.3 billion in June. Bank Indonesia (BI) also raised its benchmark interest rate three times during June. The BI rate, which had been at 4.75% since September 2025, was raised to 5.25%, 5.50%, and 5.75% from May to June 2026.

            The government claims the exchange rate depreciation was caused by the strengthening of the USD as a result of the Israel-United States-Iran war that erupted on February 28, 2026, and the Federal Reserve’s high interest rate policy. However, the rupiah also depreciated against other currencies, including the Singapore dollar, Australian dollar, Japanese yen, Chinese yuan, Thai baht, and Malaysian ringgit. The rupiah even weakened against the currencies of lower-tier countries like Nigeria and Ethiopia. Tragically, the rupiah exchange rate against the kina, Papua New Guinea’s currency, plummeted from Rp 3,802 per kina at the start of the year to Rp 4,100 per kina by the end of June.