Rupiah Still Undervalued as Peer Pressure Deepens Early 2026

JAKARTA, Investortrust.id — Bank Indonesia Governor Perry Warjiyo said the rupiah remains undervalued on Tuesday, Jan 27, 2026 in Jakarta, citing strong fundamentals and policy actions even as the currency recently strengthened. The assessment came as BI reiterated its stabilization mix to counter global uncertainty and guide the rupiah toward fair value.

Perry said the recent weakness was driven by short-term technical factors rather than domestic fundamentals.

"Does Bank Indonesia see the rupiah exchange rate as still undervalued? Yes," Perry said during the KSSK I-2026 press conference at the Finance Ministry.

"From a fundamental perspective, the rupiah exchange rate will strengthen," he added, pointing to low inflation, improving economic growth, and attractive investment returns.

The central bank said it maintained the policy rate at 4.75 percent from October to December 2025 and in January 2026 to stabilize the currency amid heightened global uncertainty.

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"Going forward, BI will continue to carefully assess room for further BI Rate cuts, with inflation in 2026–2027 expected to remain under control within the 2.5 percent target plus or minus 1 percent," Perry said.

BI also said it would intensify stabilization through offshore non-deliverable forwards, onshore spot and domestic non-deliverable forwards, and secondary-market bond purchases, while expanding foreign exchange operations in US dollars, Chinese yuan, and Japanese yen.

Complementing BI’s view, the BRI Economics team led by Chief Economist Anton Hendranata said rupiah pressure persisted in early 2026 despite the currency being undervalued on a real effective exchange rate basis.

"Rupiah pressure continued in early 2026, as reflected in a deeper year-to-date depreciation compared with several peers, particularly amid a stronger US dollar and global sentiment that remains selective toward emerging market assets," the team wrote in a recent report.

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BRI noted that Indonesia’s REER depeciation so far this year was larger than regional peers, with rupiah at 1.56% compared with India rupee at 1.23% and the Philippines peso at 1.08%, while Malaysia's ringgit apprecited by 0.12%, Thailand by 1.36%, and Brazil by 1.81%, indicating relatively stronger peer currencies against the US dollar.

"Fundamentally, the rupiah REER being below the 2020 base year indicates that the current exchange rate weakness is driven more by short-term external factors than by a deterioration in domestic fundamentals," the report said.

"For Bank Indonesia, this condition reinforces the need to maintain a pro-stability policy stance, focusing on safeguarding exchange rate stability through a calibrated mix of monetary policy and measured intervention, while still monitoring room for policy easing ahead so as not to exacerbate rupiah volatility," the team added.

On Monday, Jan 26, 2026, the rupiah closed stronger at Rp 16,770 per US dollar, with BI projecting further appreciation in line with stabilization measures and improving economic fundamentals.