January 21, 2026 | 03:07 pm
TEMPO.CO, Jakarta - The rupiah exchange rate plunged to Rp16,956 per US dollar at the close of trading yesterday, January 21, 2026. The Institute for Economic and Social Research at the Faculty of Economics and Business, University of Indonesia (LPEM FEB UI), reported that the rupiah has significantly declined over the past month.
Approaching the Rp17,000 mark, the currency weakened against the dollar from mid-December 2025 to mid-January 2026. During this period, foreign capital entered the domestic financial market, reaching approximately US$1.49 billion, with US$0.56 billion invested in government bonds and US$0.94 billion in stocks.
"Although there was a net inflow into the Indonesian financial market, the rupiah weakened by 1.16 percent (month-to-month) between mid-December 2025 and mid-January 2026, moving from Rp16,685 to Rp16,880 per US dollar," stated the Macroeconomic Analysis Series published by LPEM FEB UI on Tuesday, January 20, 2026.
LPEM FEB UI researcher Teuku Riefky explained at least three reasons for the strengthening US dollar and the weakening rupiah. First, the dollar gained ground after US labor data released in early January 2026 exceeded expectations, fueling market anticipation that the US Federal Reserve would maintain high interest rates for a longer period.
Second, geopolitical uncertainty following the US military operation in Venezuela in early January is believed to have increased demand for the US dollar as a safe-haven asset. Finally, domestic factors influenced growing concerns regarding Indonesia's fiscal position.
The 2025 budget deficit was reported to have widened to around 2.92 percent of the gross domestic product (GDP), exceeding previous projections and nearing the legal maximum limit of 3 percent. On one hand, slower-than-expected tax revenue also contributed to this deficit.
The widening deficit raises questions about fiscal sustainability and coincides with a period of outflows from the bond market, particularly in long-term government bonds, as some investors reassess risks and adjust their portfolios. "These global and domestic factors help explain why the rupiah weakened despite a positive portfolio flow during this period," Riefky said.
Earlier, Finance Minister Purbaya Yudhi Sadewa expressed optimism that the rupiah would improve in tandem with the domestic economic recovery. "As for the rupiah, I cannot comment; that is the Central Bank's business. But if the economy continues to improve, the rupiah should also strengthen, almost automatically," he said on Jan. 14.
Erwin G. Hutapea, Head of the Monetary and Securities Asset Management Department at Bank Indonesia, stated that factors influencing the rupiah's depreciation include rising geopolitical tensions and concerns over central bank independence in several developed countries.
Another factor is the uncertainty surrounding the monetary policy direction of the US Federal Reserve amidst an increased need for foreign exchange at the beginning of the year.
Nevertheless, this depreciation is considered reasonable as it aligns with the trend of other regional currencies affected by global sentiment. These include a 2.46 percent depreciation of the South Korean won and a 1.04 percent depreciation of the Philippine peso.
Read: Rupiah Could Strengthen If There Is Certainty About Policy Direction, Says Economist
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