Rupiah Set for Fifth Weekly Rise as Dollar Retreats

The Indonesian rupiah hovered near IDR 17,650 per U.S. dollar on Friday, remaining below IDR 17,700 for a second straight session as the dollar weakened further after traders scaled back expectations for a Federal Reserve rate hike this month following dovish comments from a central bank official. Meanwhile, Bank Indonesia Governor Destry Damayanti said domestic inflation remains under control and called for closer cooperation among the government, central bank, businesses, and economists to support economic growth. Gains were tempered, however, by growing concerns that El Niño could disrupt food supplies and push up prices in the coming months. Market caution also prevailed ahead of next week’s data releases, including August foreign exchange reserves, consumer confidence, and July retail sales, which could offer fresh clues on domestic demand and monetary policy. Still, the rupiah was on track to strengthen for a fifth straight week, gaining around 0.25% so far.

The Indonesian rupiah traded below IDR 17,700 per U.S. dollar on Thursday, strengthening for a second straight session as the dollar index extended its slide. The greenback was pressured by a sharp yen rally amid speculation of Japanese intervention following a rate check. Domestically, Destry Damayanti was sworn in Wednesday as Bank Indonesia’s first female governor, vowing responsive policy to balance stability and growth. She also raised the 2027 growth outlook to 5.2%-6%, with the upper end marking the strongest pace since 2012. A narrow trade surplus in July also lent support, as stronger non-oil and gas exports helped offset a surge in imports, particularly fuel. Gains were capped, however, by caution ahead of next week's foreign exchange reserves and consumer confidence data. Meanwhile, inflationary pressures intensified, with August headline inflation accelerating from July's three-month low on higher food prices and core inflation climbing to its highest since March 2023.

The Indonesian rupiah slipped toward IDR 17,780 per U.S. dollar on Wednesday, down for the second session as the dollar index strengthened to a near three-week high amid surging oil prices that stoked inflation concerns and reinforced views of a less accommodative Fed stance. Locally, caution emerged ahead of key domestic data due next week, including August forex reserves and consumer sentiment. Meanwhile, domestic price pressures picked up, with headline inflation accelerating in August from July’s three-month low, driven by higher food prices, while core inflation hit its highest since March 2023. Still, a narrow trade surplus offered some support for the rupiah, with stronger non-oil and gas exports helping offset a surge in imports, particularly fuel. Separately, Parliament confirmed Destry Damayanti as Bank Indonesia governor, making her the first woman to lead the central bank. She raised the 2027 growth outlook to 5.2%-6%, with the upper end marking the fastest pace since 2012.