With only 1 percent of appreciation in the first month of the year, Indonesia is facing a slew of challenges in managing a stable exchange rate throughout 2017, due to increasing global headwinds from economic policies and geopolitical situation changes.

Bank Indonesia (BI) data show that the rupiah became more stable with a tendency of appreciation entering 2017 as the currency strengthened by 0.9 percent to Rp 13,352 per US dollar in January due to returning inflows, which the central bank claimed was triggered by investors’ favorable perception of the domestic economy.

However, things may not get easier for currency management as risk from the United States’ economic policy gets more persistent with The Fed slated to raise its rate faster than previously expected, according to Bank Indonesia’s (BI) latest assessment.

The central bank also saw risks from the United Kingdom parliament’s vote of a “hard” Brexit, or leaving the European Union without an exit or trade deal, as well as rising geopolitical tension from upcoming elections in the continent, such as in France and the Netherlands, where populist parties are in the lead.

“We know that there is a problem of [market] sentiment here. However, people need not panic if the exchange rate suddenly weakens when there is news from Europe and so on because BI will always be in the market,” said BI economic and policy director Yoga Affandi at a press gathering in Bandung, West Java, on Saturday.

Aside from maintaining a comfortable level of exchange rate for both exporters and importers, BI was convinced that its regulation requiring companies to hedge their foreign exchange (FX) exposure would help reduce currency risk at times when the rupiah faces volatility.

Despite the risk, BI said that Indonesia’s economic fundamental remained strong due to positive macroeconomic indicators based on a more realistic state budget and ongoing structural reforms, thus giving certainty for investors on the country’s long-term outlook.

“Indonesia’s macroeconomic policy helps us to stand out [among other emerging markets]. We were once part of the ‘fragile five’ along with Brazil and Russia, but now we are considered one of the best three emerging markets for investment,” Yoga said.

Analysts have pointed out that the downside effect on the rupiah could also emerge from current political tensions surrounding Indonesia’s regional elections, particularly in Jakarta. As there will be no single candidate to win outright in the first round, a research report by Maybank Kim Eng Securities calculates four scenarios in which the Jakarta election outcome will impact the rupiah, with the best case scenario seeing the currency level lower to Rp 13,250 per US dollar if Jakarta incumbent Governor Basuki “Ahok” Tjahaja Purnama wins the election and is found not guilty in the blasphemy case.

Meanwhile, the worst case scenario predicted by the bank would see the rupiah climb beyond Rp 13,450 per US dollar toward Rp 13,600 if Ahok loses the election and is convicted of blasphemy with a maximum sentence.