Bank Indonesia delivers a rate hike: Will it defend the Rupiah?

Bank Indonesia (BI) decided to hike the benchmark interest rate by 25 basis points to 5.75% on June 18, from the previous 5.5%. The decision aligned with the market expectations.

The Indonesian Rupiah (IDR) received support against the US Dollar (USD) as an immediate reaction to the BI interest rate decision. However, the USD/IDR recovers and is trading around 17,890 at the time of writing.

BI's surprise rate hike

BI raised its benchmark interest rate by 25 basis points to 5.50% on June 9, stepping in to stabilise the Indonesian Rupiah after the currency hit a series of record lows. A central bank spokesperson noted that foreign investors have responded positively to this rare, off-cycle interest rate hike and the accompanying rise in bond yields, which triggered a notable increase in foreign capital inflows over the past week.

According to BI spokesperson Ramdan Denny Prakoso, the central bank recorded stronger foreign capital inflows during its June 10 auction of Bank Indonesia Rupiah Securities (SRBI) for tenors up to one year. Data from BI's website shows the auction successfully raised 15 trillion rupiah ($834.49 million).

BI Governor Perry Warjiyo's key quotes

Inflation remains under control.

Rupiah is seen stabilising, with a tendency to strengthen going forward.

2026 GDP outlook is seen in the range of +4.9% to +5.7%, unchanged.

Rupiah has strengthened, supported by Bank Indonesia's stabilisation measures.

Has increased the intensity of currency interventions to defend the rupiah.

We have raised SRBI rates to attract foreign capital inflows.

Outstanding SRBI rupiah notes at 1,021.1 trillion rupiah, with non-resident investors holding 238.1 trillion rupiah as of mid-June.

Fed pause and weak rupiah pressure BI rate decision

The Interest rate decision also came against the backdrop of the US Federal Reserve (Fed) keeping interest rates unchanged while signaling that further tightening remains possible. The Indonesian Rupee has been among Asia's weakest-performing currencies this year, pressured by higher energy prices linked to geopolitical volatility and lingering concerns over domestic policymaking.

Technical Analysis: USD/IDR recovers above nine-day EMA

USD/IDR recovers its recent daily losses, trading around 17,890 at the time of writing. The pair is keeping a bullish near-term bias as spot holds above both the nine-day and 50-day Exponential Moving Averages (EMAs).

The short-term EMA trades above the longer one, and price remains extended on the topside, while the 14-day Relative Strength Index (RSI) has eased back toward the upper-50s, suggesting bullish momentum has cooled from overbought but remains constructive as long as the pair defends its reclaimed moving-average supports.

On the downside, initial support is seen at the nine-day EMA around 17,870, with the 50-day EMA near 17,556 providing a deeper demand zone if a pullback accelerates. As long as spot holds above these layers, the broader topside bias remains intact, though the absence of nearby chart resistance and a moderating RSI warns that upside progress could become more gradual rather than impulsive in the sessions ahead.

(The technical analysis of this story was written with the help of an AI tool.)