Rupiah Stays Weak on Hawkish Fed Outlook

The Indonesian rupiah hovered around IDR 18,090 per U.S. dollar on Wednesday, remaining under strain from policy uncertainty following the sudden exit of Perry Warjiyo as central bank governor. Local reports suggested his departure followed a major dispute with the finance minister over growth strategies, though whether the disagreement directly triggered his resignation is unclear. The president’s spokesperson denied speculation of government pressure. Some economists said a permanent appointment for the new chief is expected within the next two months, with markets likely to stay cautious until the successor is formally named. Bank Indonesia raised rates by a total of 100bps since May to shore up the currency and attract foreign inflows. Yet the rupiah has still slipped about 8% so far this year, extending losses from the past two years. Globally, the U.S. dollar index steadied ahead of the Fed’s policy decision later today, with markets broadly expecting rates to stay unchanged.

The Indonesian rupiah slid toward IDR 18,100 per dollar on Tuesday, marking a second day of losses as the greenback stayed firm ahead of the Fed’s policy decision later this week. Domestically, sentiment was unsettled after Governor Perry Warjiyo resigned, with Senior Deputy Destry Damayanti stepping in as acting chief until a permanent successor is named. The leadership change comes at a fragile moment, with fiscal strains, doubts over the government’s agenda, and fading foreign investor confidence weighing on Indonesian assets. Concerns over central bank independence also lingered after President Prabowo appointed his nephew to the BI’s board. Traders now look to the upcoming securities auctions for signals of the central bank’s resolve to aid the rupiah. Last week, the board surprised markets by holding its key rate at 5.75%, despite expectations for another hike following 100bps of tightening since May. The rupiah has lost near 8% this year, ranking among Asia’s weakest currencies.

The Indonesian rupiah slipped to around IDR 17,980 per U.S. dollar on Monday morning after briefly firming near 17,900 in the prior session, pressured by the sudden resignation of Bank Indonesia Governor Perry Warjiyo. President Prabowo had accepted the exit, State Secretariat Minister Prasetyo Hadi said, ahead of market opening. Senior Deputy Governor Destry Damayanti, appointed interim governor, noted Warjiyo departed for personal reasons. Analysts cautioned the move could unsettle investors already concerned about fiscal risks and central bank autonomy. Warjiyo, who began his second five-year term in 2023, had faced mounting pressure to align policy with the government’s growth agenda as the rupiah hit record lows in June. Last week, the board kept its key rate at 5.75%, defying consensus for a further lift following a total of 100bps of hikes since May. Globally, the dollar eased as oil prices fell after a pause in U.S.–Iran hostilities, tempering supply and inflation concerns.