FX.co ★ Rupiah Remains Weak Ahead of Key Local Data

The Indonesian rupiah edged closer to IDR 16,790 against the dollar on Friday, continuing its downward trend from the previous session. This decline is attributed to rising expectations of a potential reduction in domestic interest rates, following the central bank's indication of a renewed focus on stimulating economic growth. Such signals suggest that policy easing could be on the agenda later this year, compounded by 150 basis point cuts since September 2024. Additionally, market sentiment was subdued due to caution ahead of crucial upcoming data releases, such as January’s inflation rates, December’s trade statistics, and Q4’s GDP figures. These releases occur amid prevailing concerns regarding a slowdown in both global and domestic economic momentum. The rupiah also faced challenges from a downturn in local equity markets, exacerbated by MSCI's warnings about transparency issues, which increased the danger of multi-billion-dollar foreign capital withdrawals. On a monthly scale, the rupiah is poised to register its third consecutive decline, currently down approximately 0.8%. On the international front, the dollar index gained strength, recovering from a recent four-year low, buoyed by developments such as a tentative U.S. agreement to prevent a governmental shutdown and anticipation surrounding Trump's upcoming nomination for the Federal Reserve chair position.