What is 'IDR'

The Indonesian rupiah, or IDR, is the currency of Indonesia. It is subdivided into 100 sen and is issued by Bank Indonesia.

BREAKING DOWN 'IDR'

The Indonesian Rupiah derives its name from its sister currency, the Indian rupee. The Riau Islands and the Indonesian half of New Guinea both had their own versions of the Rupiah at one time but both have since been absorbed by the Indonesian currency.

Following the global financial crisis of 2008, the Indonesian rupiah has generally traded between 9,500 and 14,000 rupiah per U.S. dollar.

History of the Indonesian rupiah

The Indonesian rupiah first appeared in October of 1946, more than a year after Indonesia declared independence upon the Japanese surrender following World War II. The currency traded on the black market while the Netherlands attempted to re-establish control over its former colony. In 1950, the Netherlands recognized Indonesian sovereignty and the Indonesian rupiah became formally recognized by the international community as the country’s legal tender. The Indonesian rupiah replaced all former Dutch, Javanese and Japanese currencies being used. At its introduction, the currency traded at a rate of 3.8 rupiah to 1 U.S. dollar.

A government-established foreign exchange system lasted only until January of 1952. A devaluation to 11.4 rupiah to 1 U.S. dollar followed in February, alongside export tariffs on certain commodities. The government continued to issue restrictions on foreign exchange through 1954 in an attempt to maintain its preferred level of reserves. Another devaluation in 1959 triggered a period of extremely high inflation, reaching 635% in 1965. In response, the government devalued the currency by issuing a new rupiah at a 1 to 1,000 rate. Multiple exchange rates coexisted at the time, so the official reset of the exchange rate to 0.25 Indonesian rupiah to 1 U.S. dollar was effectively meaningless in practice.

The rise of the Suharto regime stabilized the economy, bringing inflation back down to the low-single digits by the early 1970s. In August 1971, the government pegged the currency at 415 Indonesian rupiah to 1 U.S. dollar. Continued issues with inflation pushed the government to abandon the peg in 1978. Between that time and 1986, the government used a dirty float policy, publishing a daily exchange rate. Economic pressure from overvaluation and an oil surplus in the 1980s caused further devaluations. Increased pressure from an Asian financial crisis in the late 1990s caused the central bank to allow the currency to float freely in 1997, triggering a rapid fall in its value. While it showed some signs of stability heading into the early 2000s, the global financial crisis of 2008 renewed pressure on the country’s economy, leading to a slow but steady decline since that time.

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