Rupiah Faces Severe Pressure Amid Global Uncertainty, Weakening 3% in 2025
The Indonesian rupiah has plummeted to its lowest point since the 1998 Asian financial crisis, with the currency weakening over 3% in 2025. On March 25, the rupiah fell by 0.5% to 16,642 against the US dollar, its weakest level since June 1998, before partially recovering. This sharp decline has made it one of the poorest performers among emerging market currencies this year.
To prevent further losses, Bank Indonesia (BI) took decisive action, intervening in various markets, including the foreign exchange and bond markets, to stabilise the rupiah. Fitra Jusdiman, BI’s director for monetary management and asset securities, noted that the intervention aimed to balance the supply and demand of foreign currency and maintain investor confidence. He attributed the rupiah’s decline primarily to global uncertainties, such as trade tensions caused by US tariffs and the potential tightening of US monetary policy.
The rupiah has also struggled against the Singapore dollar, dropping about 6% in 2025, trading at 12,398.16 per Singapore dollar by the afternoon of March 25. Despite being a popular market for global investors a year ago, Indonesia’s appeal has waned amid growing concerns over the sustainability of its economic policies.
Under President Prabowo Subianto, Indonesia has seen populist policies that risk pushing the budget deficit towards its legal limit of 3% of GDP. Additionally, the country’s parliament has agreed to expand the role of the military, reversing some reforms put in place after President Suharto’s regime fell in 1998.
Fiscal concerns are expected to continue weighing on the rupiah, with Bank of Singapore strategist Moh Siong Sim forecasting further pressure as the US is likely to announce new tariffs on April 2. Since January, BI has been forced to intervene almost daily to stabilise the rupiah after a surprise rate cut aimed at boosting growth.
This financial instability has been compounded by a sell-off in the nation’s stock market, which entered a bear market in February. Global investors have pulled out over US$2 billion in stocks this year, spurred by fiscal worries, leading regulators to relax share buyback rules and postpone short-selling implementation.
As the US tariff announcement approaches, and with a long festive holiday from March 28 to April 7, further volatility is expected. BNY senior strategist Wee Khoon Chong warned that the rupiah’s volatility could worsen in the short term, with investors potentially selling ahead of the holiday period to mitigate tariff-related risks.
