The Indonesian rupiah weakened toward IDR 17,950 per U.S. dollar on Monday, after briefly firming to around IDR 17,850 in the previous session. The decline came as the U.S. dollar index hovered near an 18‑month high, even though traders pared back expectations for an imminent Federal Reserve rate hike following softer U.S. employment data. Market sentiment was also cautious ahead of key domestic releases this week, including September foreign exchange reserves and August retail sales.
Indonesia’s external position remained vulnerable despite posting a trade surplus in August, as elevated imports and higher energy costs continued to pressure the balance of payments amid persistent uncertainty in the Middle East. Nonetheless, fiscal conditions have been relatively supportive, with the budget deficit kept under control through August, offering some backing to the rupiah.
At the same time, local media reported that Bank Indonesia may raise its benchmark interest rate to 6% in the coming months, as rising food and energy prices and the recent rupiah depreciation intensify inflation risks. Annual inflation accelerated to 3.28% in September, marking a three‑month high.
