The Indonesian rupiah slipped to around IDR 17,700 per U.S. dollar in thin holiday trading on Tuesday, erasing gains from the previous two sessions and pulling back from a three-week high. Sentiment deteriorated as traders grew wary of the rising cost of defending the currency, following a decline in foreign exchange reserves in May to their lowest level in nearly two years, pointing to continued central bank intervention.
Domestic fundamentals also appeared fragile. Consumer confidence in May dropped to its weakest level since September 2025, while April retail sales fell for the first time in a year. External headwinds intensified as well, with Washington set to begin phasing in an 18% tariff on Indonesian goods from July 24, posing risks to exports and capital inflows.
Even so, the rupiah’s losses were limited by expectations that Bank Indonesia may maintain a hawkish stance, having already delivered a total of 75 basis points of rate hikes since May, ahead of its two-day policy meeting starting Wednesday. On the global front, the U.S. dollar was steady as markets awaited the Federal Reserve’s first policy decision under its new Chair, Kevin Warsh.
