Rupiah Set for Third Weekly Decline as Dollar Holds Firm

The Indonesian rupiah hovered near IDR 17,900 per U.S. dollar on Friday, struggling to move further away from the IDR 18,000 level reached earlier this week. A persistently strong dollar index continued to weigh on sentiment, with the greenback holding near an 18-month high amid expectations for further Fed tightening as U.S. inflation remains elevated, while Middle East uncertainty adds to broader market risks. Meanwhile, Bank Indonesia Governor Destry Damayanti said recent rupiah pressure reflected global conditions, shifts in capital flows and weaknesses in external-sector fundamentals. Locally, September headline inflation accelerated to a three-month high of 3.28%, driven by persistent food-price pressures partly linked to El Niño effects. For the week, the rupiah is on track to log its third consecutive weekly decline, down around 0.1% so far. Traders now await September foreign-exchange reserves, consumer confidence and August retail sales data next week.

Indonesia’s rupiah edged lower, hovering near IDR 17,960 per U.S. dollar on Thursday, the first trading day of October, after briefly touching 17,930 in the prior session. Cautious sentiment reemerged as the dollar index hit an 18-month high and U.S. Treasury yields rose to multi-year peaks, amid concerns that energy-driven inflation could keep policy tighter for longer. Locally, inflation worries deepened after September headline inflation accelerated to 3.28% yoy, a three-month high, due to persistent food-price pressures amid El Niño effects. Elevated crude oil prices added risks for Indonesia, a net oil importer, by raising import costs and fiscal pressure. Still, stronger-than-expected August trade data provided some support even as imports grew much faster than exports. Meanwhile, Bank Indonesia continued to bolster liquidity and safeguard rupiah stability through secondary-market bond purchases and a mix of spot, DNDF and offshore NDF interventions.

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.