Bank Indonesia Shifts Rupiah Defense Strategy Amid Dollar Strength

Bank Indonesia has shifted its strategy for defending the rupiah against external pressure. The central bank is relying more heavily on hedging and liquidity tools to shield the currency from a strong dollar, while reducing costly spot market interventions.

The move comes as the US dollar held near a two-month high against other currencies and oil prices rose due to tensions between the United States and Iran. The rupiah breached the 18,000 level again on Monday after Bank Indonesia kept its benchmark rate unchanged at 5.75 percent despite a recent rate hike by the US Federal Reserve.

Banking regulator Destry Damayanti said that BI had reduced spot market foreign exchange interventions to 30 percent of total interventions because they were too costly. She added that the central bank would strengthen monitoring of foreign exchange flows and continue to bolster liquidity adequacy through repo monetary operations for non-SBN securities.

The central bank has opened repo facilities for non-government securities issued by mortgage lender PT Sarana Multigriya Finansial (SMF), which will be expanded in October 2026 to cover corporate bonds issued by infrastructure financing firm PT Sarana Multi Infrastruktur (SMI).