The Effect of Foreign Exchange Reserves and Interest Rates on the Stability of the Rupiah Exchange Rate

Abstract

This study aims to analyze the effect of foreign exchange reserves and Bank Indonesia's benchmark interest rate (BI-Rate) on the stability of the Rupiah exchange rate against the US Dollar. The research is motivated by recurring depreciation pressures on the Rupiah amid global economic uncertainty, while Bank Indonesia consistently uses foreign exchange reserves and interest rates as stabilization instruments. This study employs a quantitative associative approach using monthly secondary time series data from July 2024 to June 2026 (n=24) sourced from official Bank Indonesia publications and economic data institutions. The analysis technique used is multiple linear regression, supported by classical assumption tests (normality, multicollinearity, heteroscedasticity, and autocorrelation), t-test, F-test, and the coefficient of determination (R²). The results show that partially, foreign exchange reserves have a negative and significant effect on the Rupiah exchange rate, the benchmark interest rate also has a negative and significant effect, and simultaneously both variables significantly affect the exchange rate with a contribution of 79.68 percent. However, the classical assumption tests indicate the presence of autocorrelation and heteroscedasticity commonly found in non-stationary macroeconomic time series data, so the results must be interpreted with caution. This study recommends strengthening monetary policy coordination based on the adequacy of foreign exchange reserves and interest rate credibility to maintain Rupiah exchange rate stability in the medium term.