Rupiah Pressured by Firmer Dollar, Domestic Caution

The Indonesian rupiah extended its slide on Thursday, hovering near IDR 17,750 per U.S. dollar, as the dollar index held firm on stronger U.S. economic data, dimming hopes for near-term Federal Reserve easing. Meanwhile, domestic sentiment remained fragile amid ongoing major protests in Jakarta today, with investors wary of potential unrest reminiscent of last year’s turmoil. Caution also persisted ahead of next week’s August inflation data, with El Niño-related weather risks raising concerns about higher food prices, alongside July trade figures after June's print highlighted pressures stemming from global energy markets. Still, remarks from Destry Damayanti, the sole nominee for Bank Indonesia governor, offered some reassurance. She told parliament that closer policy coordination would not erode the central bank’s independence and stressed that its stance will remain centered on stability while supporting growth, reinforcing confidence in policy continuity.

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.