NextFin news, in the first week of November 2025, Indonesia witnessed a depreciation of its rupiah to Rp 16,717 per US dollar. This occurred despite Indonesia reporting strong economic performance in the third quarter, where GDP growth exceeded market expectations. The National Statistics Agency revealed that Indonesia’s Q3 GDP expanded around 5.2% year-on-year, supported by robust domestic consumption, manufacturing, and export sectors across key commodities such as palm oil and coal.
However, the rupiah’s softness contrasts with the upbeat growth data, primarily due to persistent external pressures. The US Federal Reserve, under President Donald Trump’s administration, signaled no immediate plans to cut interest rates, emphasizing its commitment to controlling inflation through a hawkish monetary stance. As a result, the US dollar has maintained broad strength against emerging market currencies, including the rupiah.
This currency dynamic markedly impacts Indonesia’s financial markets and capital flows. Foreign investors have taken a cautious approach, with net capital outflows recorded from Indonesian equity and bond markets in October 2025. The sustained dollar strength increases the cost of foreign-denominated debt servicing for Indonesian corporations and public institutions, adding fiscal pressure amid global economic uncertainties.
Several factors contribute to the rupiah’s depreciation despite strong domestic economic fundamentals. The first is the yield differential: the Fed’s commitment to keeping US interest rates elevated makes dollar assets more attractive, drawing investment away from emerging markets like Indonesia. Second, geopolitical risks in the Asia-Pacific region and global trade tensions add layers of uncertainty, prompting risk-averse behavior among international investors.
Indonesia’s trade balance and external accounts provide partial relief but are insufficient to counterbalance currency pressures. While net exports improved due to rising commodity prices and demand, import bills surged with a weaker rupiah, complicating external debt sustainability metrics.
From a policy perspective, Bank Indonesia faces a conundrum—tighter monetary policy to support the rupiah could stifle nascent economic growth, whereas accommodative policy risks deeper currency depreciation and inflationary pressures. Recent statements from Bank Indonesia indicate a cautious but watchful approach, balancing inflation targeting with financial market stability.
Looking ahead, the rupiah’s trajectory will largely hinge on the Federal Reserve’s policy direction and global risk sentiment. If the Fed signals eventual rate cuts in mid-2026 amid easing US inflation, emerging market currencies may rebound. Conversely, prolonged US monetary tightening will continue to reinforce the dollar, pressuring emerging market currencies including the rupiah.
Indonesia’s strong underlying economic fundamentals — diversification efforts, infrastructure investment, and expanding digital economy sectors — offer buffers against volatility. However, external shocks and Fed policy will remain principal determinants of rupiah performance in the near term.
In conclusion, the rupiah’s weakness despite impressive Q3 2025 GDP growth reflects the overriding influence of global monetary conditions — specifically Fed policy — on emerging market currencies. This underlines the interconnectedness of global finance, where even solid domestic economic progress can be overshadowed by external factors beyond immediate control. Policymakers and investors alike must navigate this complex landscape with prudence and strategic foresight.
According to the Jakarta Globe, this trend underpins a recurring pattern where emerging market currencies experience pressure amid global dollar strength, reaffirming the critical role of US policy decisions in shaping international capital flows and currency valuations.
