Rupiah Set for Monthly Loss Despite Quarterly Gain

The Indonesian rupiah hovered near IDR 17,850 per U.S. dollar on the last trading day of September, rising for a second session after Bank Indonesia emphasised consistent, sustainable interventions and noted its trajectory stayed in line with regional peers. The central bank has shifted its strategy by reducing spot-market interventions to 30% and focusing more on NDFs. Fiscal clarity also improved as Parliament passed the 2027 Budget Bill. Gains were capped, however, as the dollar index stayed firm amid persistent U.S. inflation and hawkish Fed signals. The rupiah is set to log a monthly drop of about 0.6%, weighed by domestic inflation after annual CPI accelerated to 3.19% in August on higher food costs linked to El Niño. External risks also lingered, with elevated crude prices posing fiscal challenges for energy-import-reliant Indonesia. Still, the local currency is on track to strengthen for the quarter, up around 0.6% so far, recovering part of its 5.7% drop in the prior period.

The Indonesian rupiah stayed above IDR 18,000 per U.S. dollar on Tuesday, hovering near its weakest since early August, as a firm dollar weighed on sentiment. The greenback held close to a two-month high on expectations of further Fed tightening, with higher energy prices adding to inflation risks. Domestically, caution lingered ahead of August trade and September inflation data. Annual inflation accelerated to 3.19% in August, lifted by food costs amid El Niño-related supply disruptions. Fiscal and external risks persisted, particularly from elevated crude prices given Indonesia’s reliance on imports. Economists warned that prolonged rupiah weakness could hurt growth by raising costs of imported inputs, energy, and capital goods. Still, the downside was partly limited by Bank Indonesia’s interventions across offshore NDFs, domestic spot, and DNDF markets. The board kept its benchmark rate at 5.75% last week for a third straight month after cumulative 100bp hikes between May and June.

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.