xtransfer
  • Products & Services
  • About Us
  • Help & Support
global englishGlobal (English)
Create account
All articles/Article detail

USD to Indonesia Rupiah: Exchange Rate and its Influence on Foreign Trade

Author:XTransfer2025-02-28

Indonesia is an important Southeast Asian market, which is important for the development of international trade. In this paper, we will introduce the trend of dollar to rupiah exchange rate changes and the impact on the trade between the two sides.

Ⅰ Trend of dollar to rupiah (USD/IDR) exchange rate change

Many factors can influence USD to rupiah exchange rate, such as the global economy, Indonesia's domestic economy, monetary policy and market volatility. Over the past decades, the rupiah has generally depreciated, but there are short-term fluctuations and the future trend is still subject to a number of uncertainties.

1. Historical exchange rate trends

The rupiah has continued to depreciate against the US dollar over the past decades. For example, during the 1997-1998 Asian financial crisis, the rupiah fell from IDR 2,500/USD to more than IDR 14,000/USD. 2020, during the New Crown Epidemic, the exchange rate of the US dollar to the rupiah reached IDR 15,867/USD, and from May 2023 onwards, the exchange rate fell back.

2. Future Exchange rate Forecast 

According to the latest forecast, the USD/IDR exchange rate will be volatile in the coming year. An the USD to rupiah exchange rate is likely to fluctuate between 16,000-17,500 IDR/USD.

3. Key factors affecting the future exchange rate

  • Global economic situation: If the global economy grows strongly and Indonesia's exports and foreign direct investment (FDI) increase, this could support the rupiah. On the contrary, a recession could lead to a devaluation of the rupiah.
  • Indonesia's domestic policies: The government's fiscal and monetary policies, ability to control inflation, and trade balance all affect the stability of the exchange rate.
  • Federal Reserve Monetary Policy: A rate hike or cut by the Federal Reserve affects global capital flows and determines the direction of the dollar against the Indonesian rupiah.
  • Commodity prices: Indonesia is an exporter of commodities such as coal and palm oil, and higher prices can help stabilize the rupiah, while the opposite may lead to a depreciation of the rupiah.
  • Geopolitical risk: International instability (e.g., war, economic sanctions) could push capital into safe-haven assets such as the U.S. dollar. It puts pressure on the rupiah.

4. Conclusion

The US dollar/Indonesian rupiah exchange rate has a long-term depreciation trend, but the short-term fluctuation is large. In 2024-2025, the exchange rate is expected to fluctuate between 16,000-17,500 rupiah/USD, influenced by the global economy, Federal Reserve policy, Indonesia's domestic economy and commodity markets. There is still a lot of uncertainty about the future path, and investors and market participants need to keep a close eye on macroeconomic and policy changes.

 

You can search for real time exchange rate through XTransfer exchange rate platform to monitor the latest rate.  XTransfer is a one-stop financial and risk management service provider committed to making cross-border payment seamless and cost-effective for SMEs. We connect trusted financial institutions with SMEs around the world through technology, allowing SMEs to enjoy the same level of cross-border financial services as large multinational corporations. 

Ⅱ Impact of USD/IDR exchange rate changes on foreign trade between the two countries

Fluctuations in the USD/IDR exchange rate have far-reaching impacts on the import and export trade of the United States and Indonesia in terms of price competitiveness, import costs, balance of trade, and the investment environment.

1. Impact on Indonesia's foreign trade

  • Enhanced export competitiveness: When the rupee depreciates, Indonesian exports become cheaper and more competitive on international markets. For example, exports of textiles, furniture, minerals, animal and vegetable oils and steel products are likely to increase. The trade surplus is likely to widen, especially with stronger exports of non-oil and gas commodities.
  • Rising import costs: Due to the depreciation of the rupiah, the cost of imported goods into Indonesia (e.g., high-tech equipment, raw materials, and pharmaceutical products) has risen, which may dampen some of the demand for imports. Increased domestic inflationary pressures have led to higher production costs, affecting spending power and companies' willingness to invest.
  • Economic restructuring: In the long run, exchange rate fluctuations may prompt Indonesia to reduce its dependence on primary exports and accelerate industrial upgrading. It may attract foreign companies (including U.S. companies) to set up factories in Indonesia and develop manufacturing industries by taking advantage of labor and production costs.

2. Impact on United States foreign trade

  • Decreased export competitiveness: When the U.S. dollar appreciates, US exports (e.g., agricultural products, machinery and equipment, and high-tech products) become more expensive and less competitive in the Indonesian market, which may lead to a reduction in the size of exports. The trade deficit widens and some industries (e.g., manufacturing) are hit.
  • Lower import costs: A stronger U.S. dollar makes U.S. imports of goods from Indonesia (e.g., minerals, electronics, chemicals) less costly, helping to reduce production costs in the manufacturing sector. The structure of imports is optimized, and the U.S. may increase imports of high value-added products from Indonesia.
  • Global economic impact: A strong dollar could affect global capital flows. It may lead to capital outflows from emerging markets and increase financial market instability. US policies have a profound influence on global trade. They could further increase depreciation pressure on the rupiah.
Previous article
Next article