Rupiah Falls for Sixth Session After Fed Rate Hike

The Indonesian rupiah slipped toward IDR 17,750 per U.S. dollar on Thursday, extending its losing streak to six sessions as the dollar index climbed to a seven-week high after the U.S. Fed raised rates for the first time in three years and signaled it might tighten further this year to curb sticky inflation. Locally, attention turned to Bank Indonesia’s policy meeting next week, with policymakers having kept the key rate unchanged at 5.75% for a second straight month in August, following cumulative tightening of 100bp since May. Inflation risks from higher oil prices and potential El Niño effects are complicating the policy outlook, as the central bank seeks to preserve an adequate interest-rate differential while supporting rupiah stability and economic growth. Meanwhile, fiscal pressures may persist as elevated global yields and cautious investor sentiment weigh on Indonesian assets. So far this week, the rupiah has dipped around 0.8%, reversing gains in the previous six weeks.

The Indonesian rupiah slipped past IDR 17,700 per U.S. dollar on Wednesday, extending its losing streak to five sessions as the dollar index hit a one-month high ahead of the Fed’s policy decision. Markets widely expect the U.S. central bank to deliver its first rate hike in around three years, keeping the greenback supported and weighing on emerging-market currencies. Locally, headwinds persisted, with factory activity still weak in August, fragile household sentiment, and retail sales growth slowing. External risks also intensified as crude oil rose above US$100 per barrel amid mounting Middle East tensions, while elevated global yields and cautious foreign investor mood added pressure on Indonesian assets. These developments could complicate inflation and fiscal management for new Finance Minister Suahasil Nazara. Bank Indonesia will hold a policy meeting next week after leaving its key rate unchanged for a second month in August, following cumulative tightening of 100bp since May.

The Indonesian rupiah weakened toward IDR 17,700 per U.S. dollar on Tuesday, extending losses for a fourth straight session as the U.S. dollar index firmed ahead of the Fed’s policy decision later this week. Locally, elevated oil prices heightened inflation concerns after headline figures accelerated to 3.19% in August. As a net oil importer, Indonesia remains vulnerable to higher global energy costs, which could add pressure to both inflation and the fiscal position. On the policy front, Bank Indonesia is set to hold its policy meeting next week after keeping its key rate unchanged for a second consecutive month in August, following a cumulative 100bp tightening since May. Meanwhile, Suahasil Nazara was sworn in as the new finance minister, replacing Purbaya Yudhi in a surprise reshuffle, the third change in less than two years. Suahasil pledged budget discipline, including the 3% deficit cap, as external headwinds mount from rising U.S. Treasury yields and oil above $100 per barrel.