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    Challenges for the Rupiah continue due to fiscal issues and rising state borrowing, despite Bank Indonesia’s efforts

    by VT Markets
    /
    Jan 31, 2026
    The Indonesian Rupiah is struggling due to growing fiscal problems and increased government borrowing. While Bank Indonesia is working to stabilize foreign exchange rates, a complete recovery will require more transparent policies. To see genuine improvement, we need to reduce fiscal worries and boost overall confidence. Right now, there’s a risk that the USD/IDR exchange rate will stay firm because of Indonesia’s unique challenges. The forecast indicates ongoing pressure on the Indonesian Rupiah because of these fiscal issues and rising state debt. Unless the government provides clearer policies, the USD/IDR rate is likely to rise. In this situation, strategies that profit from a weaker Rupiah may be more effective. Last year, Indonesia’s budget deficit widened to 2.45% of GDP, raising concerns about the country’s debt path. This financial strain makes it hard for the Rupiah to stabilize. Therefore, traders might think about increasing their long positions in USD/IDR over the next few weeks. Bank Indonesia is dedicated to ensuring stability, having already sold over $3 billion in foreign exchange reserves this month to support the Rupiah. Although this may slow the USD/IDR’s rise for now, it doesn’t solve the central structural challenges. These actions may create better chances to enter long positions. Looking back, the trend of foreign capital leaving Indonesian government bonds that started in late 2025 continues. Recent data shows another $950 million exited the local bond market, indicating poor investor sentiment. This further supports the idea that the US dollar will likely remain strong, if not strengthen, against the Rupiah. With this in mind, buying USD/IDR call options that expire in March and April 2026 could be a smart move to benefit from potential Rupiah depreciation. This strategy offers a way to gain when USD/IDR exceeds important levels like 16,100. Right now, the implied volatility does not seem to fully account for the growing fiscal risks.

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