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Analysis of US Inflation Impact on Rupiah Depreciation and Exchange Rate Recovery Projections

Pelemahan Rupiah

The exchange rate of the Indonesian Rupiah against the US dollar has reached concerning levels, breaking through IDR 16,000, triggered by higher-than-expected US inflation data. This condition indicates significant pressure on the Indonesian economy (Rupiah Depreciation), yet based on projections from Bank Indonesia (BI), there is optimism for recovery.

Current Situation: Rupiah Depreciation

The Rupiah has dramatically weakened, recorded at IDR 16,200 per US dollar following the Lebaran holiday in 2024. The primary factors for this depreciation are the strong US inflation data indicating a still robust US economy and geopolitical conflicts in the Middle East, which have strengthened risk-off sentiments. This reflects market responses to global uncertainties affecting emerging market currencies.

Impact of US Inflation Data

The rise in US inflation has sparked speculation that the Federal Reserve (The Fed) will delay interest rate cuts from June to September. The increase in the US dollar index to 106.35 has added burden on the Rupiah, prompting BI to intervene in the market to maintain currency stability.

BI's Recovery Projections and Sustainable Initiatives

Despite short-term pressures, BI Governor Perry Warjiyo is optimistic that the Rupiah will strengthen back to around IDR 16,000 and possibly even IDR 15,800 in the coming months. Factors supporting this projection include BI's interest rate hikes, strong inflows into Bank Indonesia's Rupiah Securities (SRBI), and a stable domestic economic outlook. Further integration of sustainable finance initiatives would enhance these projections by promoting green financing and incentives for businesses adhering to ESG standards.

BI's Strategy and Policies

BI has increased interest rates, with the BI Rate now at 6.25%. This hike aims to maintain the attractiveness of portfolio investments in Indonesia, evident from significant inflows into SRBI and Government Bonds (SBN) since early May 2024. Further incorporation of sustainable finance principles in these instruments could improve their appeal to a broader range of international investors seeking ethical investment opportunities.

Exploring Sustainable Finance as a Recovery Strategy

While the Bank Indonesia (BI) has not specifically highlighted the use of sustainable finance in its current strategies to recover the Rupiah, incorporating such practices could significantly enhance recovery efforts. Sustainable finance involves investments based on environmental, social, and governance (ESG) principles that could attract long-term investments more resistant to global economic fluctuations. By promoting green bonds, sustainable loans, and other ESG-compliant financial instruments, BI could tap into a growing pool of sustainable investments. This approach would not only stabilize the Rupiah but also align Indonesia's financial practices with global sustainability trends, potentially increasing investor confidence and attracting new inflows of capital.

Conclusion: Anticipation and Actions

The ever-changing global economic and political conditions require responsive and proactive policies from BI to maintain the stability of the Rupiah's exchange rate. By potentially emphasizing sustainable finance, BI could provide an additional buffer against external shocks by diversifying investment sources and promoting long-term economic resilience.


The rise in US inflation has caused unprecedented pressure on the Rupiah, but strategic interventions and optimism from Bank Indonesia promise improvement soon. Integrating sustainable finance could further bolster the Rupiah's position, ensuring not only stability but also alignment with global sustainability goals, making Indonesia a more attractive destination for conscientious investors.


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