FX.co ★ Rupiah Extends Winning Streak as Dollar Retreats

The Indonesian rupiah strengthened to around IDR 18,000 per U.S. dollar on Thursday, rising for a third consecutive session as the greenback retreated further following softer U.S. inflation data that tempered expectations of an imminent Federal Reserve rate hike. Domestically, sentiment was supported by government plans to intensify efforts to stabilise food prices and contain inflation amid El Niño-related supply risks. In June, annual inflation quickened, edging closer to the upper end of Bank Indonesia’s 1.5%–3.5% target range. Still, the rupiah’s gains were limited by elevated crude oil prices, which rekindled concerns over the country’s import bill. Caution also prevailed among traders as higher non-subsidised fuel prices, weak factory activity, and worries about household income and spending clouded the growth outlook. Attention now turns to Bank Indonesia’s policy meeting next week, with markets watching whether policymakers will maintain their tightening bias after a cumulative 100 basis points of rate hikes in May and June, as declining foreign exchange reserves continue to weigh on the currency.