SINGAPORE – The rupiah has rebounded from a record low against the Singapore dollar after Indonesia’s central bank on June 10 unexpectedly raised interest rates to stem the fall.

But analysts warned that the recovery may be short-lived, as capital outflows, inconsistent policy, shrinking foreign exchange reserves and geopolitical tensions are likely to continue weighing on the Indonesian currency.

The rupiah, which sank to an all-time low of about 14,135 per Singdollar on June 9, strengthened to around 13,950 per Singdollar on June 11.

The recovery comes on the back of Bank Indonesia hiking up its benchmark interest rate by 0.25 percentage points to 5.5 per cent, and after the central bank had already raised rates by 0.5 percentage points in May.

Higher interest rates make Indonesian assets more attractive and can help slow capital outflows, which have put pressure on the currency in 2026.

But higher interest rates can also stifle the economy, as people tend to save more and spend less, while businesses cut back on borrowing.

Bank Indonesia’s surprise move suggests it is concerned enough about the rupiah’s steep decline to prioritise currency stability over economic growth, said Maybank economist Brian Lee in a June 10 note.