Indonesian Rupiah Hits 5-Year Low Amid Policy Uncertainty and Global Risk Aversion

The Indonesian Rupiah fell to its weakest level in five years, closing at Rp 16,454 per US dollar on February 27th. This marks the lowest point since April 2020. The currency's decline is attributed to ongoing global uncertainties and unclear domestic policies. Global risk aversion, driven by trade war concerns, has strengthened the US dollar and prompted investors to seek safe-haven currencies. Domestically, the lack of clarity in new government policies has led investors to adopt a wait-and-see approach, reducing their holdings of Indonesian assets. Analysts predict continued pressure on the Rupiah, potentially reaching Rp 16,500 per dollar in Q1 2025 and possibly weakening to Rp 16,700 per dollar in Q3 2025. Bank Indonesia's interventions and the implementation of export proceeds regulations are expected to limit further depreciation. The currency is projected to trade between Rp 16,000 and Rp 16,600 per dollar, with potential for a sharper decline towards Rp 17,000 if trade war tensions escalate significantly.