Rupiah Fails to Gain Ground After October Inflation Data

The Indonesian rupiah traded near IDR 18,160 per U.S. dollar on the first trading day of November, struggling to break below the 18,000 mark for a second straight week amid broad dollar strength ahead of U.S. jobs data and the midterm elections. Locally, October food prices accelerated further, even as headline inflation eased slightly but remained near a three-month high. Meanwhile, imports continued to outpace exports despite a stronger-than-expected September trade surplus. To support the rupiah and attract foreign capital, Bank Indonesia has maintained a policy mix involving spot, DNDF, and NDF interventions, alongside secondary-market bond purchases. Governor Destry Damayanti recently said the current benchmark rate remains adequate to anchor inflation expectations, adding that further rate adjustments would depend on incoming data. Following cumulative hikes of 100bps in May and June, BI faces the challenge of balancing rupiah stability, inflation control, and economic growth.

The Indonesian rupiah hovered near IDR 18,170 per U.S. dollar on Friday, remaining under pressure despite further easing in the dollar index after the U.S. Fed held interest rates steady earlier this week. Locally, Bank Indonesia Governor Destry Damayanti reaffirmed the central bank's focus on rupiah stability, saying the current benchmark rate remains sufficient to anchor inflation expectations. She added that any potential rate increase would depend on incoming data, following cumulative hikes of 100bps in May and June. Meantime, traders remained cautious ahead of next week's September trade and October inflation data. September inflation accelerated to a three-month high amid El Niño-related food price pressures. Elevated import and energy costs also heightened fiscal concerns amid Middle East tensions, keeping 10-year government bond yields near a 6-1/2-year high. The rupiah is set for the third straight weekly loss of around 1.1% and the second monthly fall of approximately 1.6%.

The Indonesian rupiah weakened to IDR 18,185 per U.S. dollar on Thursday before recovering to around IDR 18,120 as Bank Indonesia reiterated its commitment to support the currency through NDF, DNDF, and spot interventions, alongside government bond purchases in the secondary market. Meanwhile, the dollar index held on to losses after the Federal Reserve kept interest rates unchanged as widely expected. Broader sentiment remained fragile amid domestic and external pressures. Indonesia’s 10-year government bond yield reached 7.7% on Wednesday, its highest in four years and above the 2026 budget assumption of 6.9%, reflecting concerns over fiscal risks and inflation alongside elevated U.S. yields. Persistent foreign selling added further strain amid uncertainty over Indonesia’s MSCI market status, with a potential downgrade to standalone status next year raising concerns over capital outflows. Traders now brace for key releases next week, including September trade and October inflation.