Rupiah Rises But Set for First Weekly Decline in 7 Weeks

The Indonesian rupiah edged higher to below IDR 17,750 per U.S. dollar on Friday, snapping a six-session losing streak as oil prices retreated further, easing concerns over imported inflation. Meanwhile, policymakers continued their efforts to contain food-price volatility after headline inflation accelerated to 3.19% in August. Globally, the dollar index steadied after reaching a seven-week high, with traders assessing the Federal Reserve’s policy outlook following its latest rate decision. For the week, however, the rupiah remains on track for a decline of around 0.7%, which would halt a six-week winning streak. Sentiment was pressured by an uncertain policy outlook, as Bank Indonesia seeks to maintain an adequate interest-rate differential with the U.S. while supporting rupiah stability and economic growth. The central bank will hold its policy meeting next week after leaving borrowing costs unchanged for a second straight month in August.

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.