Rupiah Holds Below IDR 17,700 as Forex Reserves Rise

The Indonesian rupiah remained below IDR 17,700 per U.S. dollar for a third straight session on Monday, hovering around IDR 17,650, as sentiment was supported by stronger external buffers and signs of fiscal prudence. August forex reserves rose to a five-month high of USD 146.5 billion, helped by government withdrawals of external loans. Meanwhile, the government’s plan to lower the 2027 fiscal deficit to 2.4% of GDP from 2.68% this year reinforced views of tighter fiscal management. Meanwhile, Bank Indonesia Governor Destry Damayanti said domestic inflation remains under control and called for closer coordination among the government, central bank, and businesses to support growth. Globally, the dollar index steadied ahead of U.S. inflation data later this week after recently rebounding on solid jobs data, which bolstered expectations of a Fed rate hike in Sept. Attention now turns to domestic data, including August consumer confidence and July retail sales, due later this week.

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.