Rupiah Weakens as Political, Inflation Risks Mount

The Indonesian rupiah traded around IDR 17,720 per U.S. dollar on Wednesday, after briefly firming to around IDR 17,650 in the prior session. The currency came under pressure amid growing caution over plans for a potentially massive protest in Jakarta Thursday, with demonstrators calling on parliament to immediately pass the Asset Forfeiture Bill, which would strengthen efforts to seize assets linked to corruption. Traders also remained cautious ahead of next week's August inflation data, as El Niño-related risks raised concerns about higher food prices. July trade figures are also due, with the rupiah facing persistent external pressures and uncertainty over global energy markets. Still, weakness was tempered by hopes of policy continuity under acting central bank chief Destry Damayanti, with Bank Indonesia expected to prioritise currency stability. Globally, the dollar steadied ahead of the US PCE inflation report and Fed Chair Kevin Warsh’s Jackson Hole speech on Friday.

The Indonesian rupiah slipped toward IDR 17,740 per U.S. dollar in thin holiday trading on Tuesday, extending its recent weakness and retreating further from last week’s near ten-week high. Sentiment remained cautious amid persistent external pressures. Indonesia’s current account deficit widened to a record USD 12.5 billion in Q2 2026, raising concerns that elevated oil prices, firm import demand and softer exports could keep the external balance under strain in the near term. Traders also turned wary ahead of July trade data and August inflation next week, while El Niño risks added to food-price worries. Still, losses were limited by optimism that Bank Indonesia, led by acting Governor Destry Damayanti, will stay focused on currency stability after holding rates for the second month in August, following a total 100bp hike since May. Globally, the dollar steadied after recent gains as fresh U.S. steps to restrict Iran’s access to the financial system kept geopolitical risks elevated.

The Indonesian rupiah slipped to around IDR 17,700 per U.S. dollar on Monday, reversing gains in the prior three sessions as traders took profits after the currency reached a near ten-week high last week. Sentiment was also weighed by concerns that Indonesia’s current account position could remain under pressure in the near term amid elevated oil prices, firm oil import growth, and weaker exports. In Q2, the current account deficit hit a record USD 12.5 billion, signaling a deterioration in the country’s external balance. Meanwhile, inflation risks lingered as potential El Niño effects loomed, though July headline inflation eased to a three-month low. Still, losses were cushioned by a softer dollar after surging U.S. Treasury yields heightened concerns over Washington’s debt burden. Acting Bank Indonesia Governor Destry Damayanti recently reaffirmed policymakers’ commitment to rupiah stability, holding the policy rate at 5.75% for a second month following 100bps of hikes since May.