A Simple Example That Shows Why Exchange Rates Matter
You sell rattan furniture to a buyer in Europe for $10,000 USD.
In January, the USD/IDR rate is Rp 15,000, so you receive Rp 150 million.
In June, you land the same order at the same price, but now the rate is Rp 16,500. You receive Rp 165 million, which is Rp 15 million more just from the exchange rate.
But what if the rate dropped to Rp 14,000? You'd only receive Rp 140 million, even though production costs haven't changed.
This is currency risk. It affects every exporter who invoices in USD but pays costs in Rupiah.
Two Real Scenarios Exporters Face
Scenario A: The Rate Works in Your Favor
You quote a price in March when the rate is Rp 15,500. Payment comes in May when the rate is Rp 16,200.
Result: You earn more Rupiah than expected. This is extra profit from favorable rate movement.
Scenario B: The Rate Works Against You
You quote a USD price in October. Production takes two months. Payment arrives in January and the Rupiah has strengthened significantly.
Result: You receive fewer Rupiah while production costs stay the same. Your margin shrinks or disappears entirely.
Simple Ways to Protect Yourself
1. Always Calculate in Rupiah
Don't just look at the USD number. Every time you prepare a quotation, convert expected USD revenue into Rupiah and compare it against your Rupiah costs.
Simple formula: USD price × today's exchange rate = Expected IDR revenue Expected IDR revenue − Total IDR costs = Your actual profit
2. Use a Conservative Exchange Rate When Quoting
When preparing your price, use an exchange rate 3-5% lower than today's rate as a safety buffer. If the rate doesn't move against you, you earn more. If it does, you're still safe.
3. Request Faster Payment
The longer the money sits with the buyer in USD, the longer you're exposed to exchange rate risk. Where possible, negotiate earlier payment terms.
4. Ask Your Bank About Forward Contracts
For large orders (above $50,000), you can lock in today's exchange rate for a future payment date using a forward contract. Many Indonesian banks offer this for SME exporters.
How Exchange Rates Affect Your Competitiveness
Exchange rate movements also affect how competitive your prices look to international buyers.
When the Rupiah weakens, Indonesian products become cheaper for foreign buyers, creating an opportunity to win more orders over competitors.
When the Rupiah strengthens, your products become relatively more expensive. Buyers may start comparing you with suppliers from Vietnam, India, or China.
Bottom line: Monitor the exchange rate regularly around shipment and payment collection to keep your business profitable.
