Rupiah Gains Ground as Dollar Index Weakens

Market Rebound and Economic Factors

The Indonesian rupiah showed significant strength on December 24, 2025, rebounding from its weakest level in eight months ²

with a gain of Rp22 or 0.13% to close at Rp16,765 per USD. This recovery was primarily driven by the decline in the US dollar index (DXY) below the 98 level ¹

Source 1

https://investasi.kontan.co.id/news/indeks-dolar-turun-ke-bawah-98-peluang-rupiah-menguat-awal-2026-terbuka

, which has been under pressure from increasing market expectations of a Federal Reserve rate cut in 2026 ¹

Source 1

https://investasi.kontan.co.id/news/indeks-dolar-turun-ke-bawah-98-peluang-rupiah-menguat-awal-2026-terbuka

.

Global Economic Influences

The dollar index's recent weakness is not solely attributed to Fed rate cut expectations. According to David Sumual, Chief Economist at BCA, global central bank policy divergence is also playing a crucial role ¹

. While the Fed is expected to cut rates, other major central banks like the European Central Bank (ECB) and Bank of Japan (BoJ) are anticipated to maintain or even raise their interest rates, creating a complex global monetary policy landscape.

Technical and Market Analysis

Lukman Leong, an analyst at Doo Financial Futures, attributed the rupiah's strengthening to the weakening of the US dollar ²

. The Jisdor rate also appreciated 0.14% to Rp16,767 per USD, reinforcing the rupiah's recovery trend. This technical rebound comes after the currency had been under pressure for seven consecutive trading days.

Outlook for 2026

The combination of a weaker dollar and potentially accommodative monetary policy from the Fed creates a favorable environment for emerging market currencies like the rupiah. Analysts are optimistic about the rupiah's prospects in early 2026, citing the potential for continued dollar weakness and improved investor sentiment towards emerging markets.