FX.co ★ Rate Risks, Natural Disasters Weigh on Rupiah

The Indonesian rupiah experienced a decline to approximately IDR 16,670 against the US dollar on Thursday, following an earlier increase to around IDR 16,630. This depreciation was influenced by minor foreign capital outflows in early December and a cautious atmosphere leading up to the upcoming monetary policy decision. Bank Indonesia has hinted at the possibility of additional rate cuts to bolster economic progress, after consecutive pauses in October and November, and a previous total reduction of 150 basis points over the last year. This dovish approach has sparked concerns about escalating inflation risks, exacerbated by disrupted logistics due to the late-November natural disaster on Sumatra Island. Nonetheless, the negative impact on the rupiah was mitigated by robust retail sales growth in October and improved consumer confidence in November. Furthermore, foreign exchange reserves witnessed a second consecutive monthly rise in November, reaching their highest level since August. On the international front, the dollar index remained near a seven-week low after the U.S. Federal Reserve executed its third 25 basis point rate cut of the year, while indicating only one more cut expected in 2026.