FX.co ★ Rupiah Dips But Dollar Weakness Limits Losses

The Indonesian rupiah moved closer to IDR 16,750 per dollar on Friday, after momentarily strengthening to approximately 16,730 in the previous session. This occurred amid subdued trading activity due to the holiday season, which affected market sentiment. Additional pressure emerged from renewed expectations of interest rate cuts following remarks by Governor Perry Warjiyo. He suggested that policymakers still have room to maneuver rates downward, citing benign inflation levels and the imperative to stimulate growth in the aftermath of the late-November incident in Sumatra. Earlier in the month, Bank Indonesia maintained its key interest rate at 4.75% for the third consecutive meeting, after implementing a total reduction of 150 basis points from September 2024 to September 2025. Investor caution increased in anticipation of key domestic economic data releases next week, including inflation figures for December and trade data for November. Throughout the week, the rupiah appears set for its second consecutive decline, contributing to a year-to-date drop of approximately 4%, positioning it among the weakest Asian currencies. However, the downside was limited by a weaker US dollar, as the dollar index remained close to its lowest point since early October, with markets factoring in Federal Reserve rate cuts anticipated for 2026.