Rupiah Weakens Ahead of Key Data Amid Firm Dollar

The Indonesian rupiah slipped past IDR 17,950 per U.S. dollar on Monday, reversing prior gains as a stronger greenback weighed on sentiment. The dollar index hovered near a two-month high, buoyed by rising oil prices that reinforced expectations of further Fed tightening and heightened geopolitical risks. Locally, caution prevailed ahead of key releases later this week, including August trade, September inflation, and manufacturing activity. Meanwhile, a central bank official said the rupiah remained under pressure from strong foreign-exchange demand among importers and continued portfolio outflows from domestic assets. Still, the weakness was capped by Bank Indonesia’s multi-market interventions spanning offshore NDFs, domestic spot, and DNDF markets. Policymakers last week kept the benchmark rate at 5.75% for a third month after cumulative 100bp hikes since May. Meanwhile, coordinated steps to contain food-price pressures continued following a recent pickup in headline inflation.

The Indonesian rupiah weakened toward IDR 17,950 per U.S. dollar on Friday, extending recent losses as the dollar index hovered near a two-month peak amid expectations that the Fed may tighten policy further, with inflation concerns mounting on elevated oil prices and robust U.S. economic data. Domestically, caution prevailed ahead of August trade and September inflation reports next week, with annual inflation accelerating to 3.19% in August amid higher food costs linked to El Niño. Fiscal concerns also lingered given Indonesia’s reliance on oil imports, while officials warned that rising energy prices heightened inflation risks. Persistent FX demand from importers and capital outflows also added pressure. Earlier this week, Bank Indonesia held its benchmark rate at 5.75% for a third month following cumulative 100bp of hikes since May, while continuing FX intervention and other stabilisation steps. The rupiah was on track for a second straight weekly decline, down nearly 1% so far.

The Indonesian rupiah slipped to near IDR 17,900 per U.S. dollar on Thursday, extending its recent decline as the dollar index hovered near a two-month high amid surging U.S. Treasury yields and bets on further policy tightening following solid U.S. private-sector activity. Locally, fundamentals remained weak, pressured by softer consumer confidence and sluggish household spending. Fiscal worries added pressure as higher oil prices lifted budget risks while lawmakers pushed to amend the State Finance Law to allow deficits above 3% of GDP. Bank Indonesia has sought to support the currency through measures beyond interest rates, including raising the FX swap hedging incentive to 25% to encourage foreign capital inflows and curb speculative pressure. The central bank kept its benchmark rate at 5.75% for a third month in September after raising it by a cumulative 100bp in three moves since May. The rupiah has weakened about 0.8% so far this week, setting up a second straight weekly loss.