Two of Asia’s largest emerging economies are burning through central bank reserves to prop up their currencies. Indonesia and India both intervened in foreign-exchange markets as rising oil prices and a surging US dollar applied relentless pressure.
Bank Indonesia raised its benchmark rate by 50 basis points to 5.25%, the first rate hike since 2024. It also capped monthly dollar purchases at $50,000 per individual. Indonesia’s forex reserves declined by roughly $10 billion through April 2026. Despite these measures, the rupiah hit record lows between 17,400 and 17,700 per dollar.
President Prabowo Subianto sought to reassure markets by emphasizing the nation’s strong economic fundamentals. Meanwhile, India’s central bank deployed its own reserves to stabilize the rupee. Both countries are fighting the same underlying dynamic: military conflicts in the Middle East are pushing oil prices higher, driving a flight to the dollar.
When governments impose capital controls, they create friction in the traditional financial system. Historically, this has correlated with heightened interest in Bitcoin and stablecoins, as seen during crises in Turkey, Argentina, and Nigeria. The Indonesian rate hike also matters for broader risk appetite, as higher rates in emerging markets can pull capital away from speculative assets globally.