Rupiah Steady Ahead of Key Data

The Indonesian rupiah was little changed on Friday, hovering near IDR 16,760 per dollar after recent gains, as investors awaited February inflation and January trade data for fresh direction. January headline inflation accelerated to a near three-year high of 3.55% yoy, while core inflation rose to a nine-month peak of 2.45%, though both remained within Bank Indonesia’s target range. The contained price pressures reinforced expectations that policy can stay supportive. December’s trade surplus also beat forecasts, with exports outpacing imports, adding to external stability. In mid-February, Bank Indonesia kept its key rate at 4.75% for a fifth straight meeting after delivering 150bp of cuts since September 2024, but signaled scope for further easing in line with President Prabowo Subianto’s pro-growth agenda. The rupiah is set to rise about 0.7% this week and 0.2% this month, supported by solid reserves and firmer fiscal conditions, while a steady dollar index limited sharper gains.

The Indonesian rupiah firmed to around IDR 16,750 per dollar on Thursday, extending gains from the prior session as the dollar index slipped further amid lingering uncertainty over U.S. tariffs. Domestically, Bank Indonesia kept its benchmark rate unchanged at 4.75% earlier this month for a fifth straight meeting, after delivering 150bps cuts since September 2024. The central bank noted the move aimed to support the rupiah and enhance monetary policy transmission. It added that ample foreign reserves in January would bolster efforts to stabilize the currency, with markets awaiting February inflation and January trade data due next week. So far this week, the rupiah has gained about 0.8%, aided by improved fiscal space after tax revenue surged 30.7% yoy by end-January, reflecting lower tax refunds and better compliance. However, bets of further monetary easing limited upside amid a pro-growth stance under President Prabowo, after 2025 GDP growth fell short of the 5.2% official target.

The Indonesian rupiah strengthened to below IDR 16,800 per dollar on Wednesday, following a muted prior session as the dollar index slipped after U.S. President Trump offered no shift in tariff policy during his State of the Union address. Locally, Bank Indonesia reaffirmed its commitment to currency stability, pledging liquidity support and intervention backed by ample reserves. The central bank has held its policy rate at 4.75% for a fifth straight meeting earlier this month, following 150bps of cuts since September 2024 amid subdued inflation. However, the rupiah has been pinned near record lows since President Prabowo appointed his nephew as deputy governor in early February, stoking governance concerns. Expectations of further easing, weak demand at a recent government bond auction, and skepticism over the USD 20 billion free-meals program have added to fiscal worries. Traders also remain cautious ahead of key data next week, including February inflation and January trade figures.