The Indonesian rupiah weakened to around IDR 17,990 per U.S. dollar on Monday, snapping a five-session rally despite a softer greenback after weaker U.S. employment data dampened expectations of further Federal Reserve rate hikes. Market attention turned to domestic risks ahead of the release of June foreign exchange reserves, following a fifth consecutive monthly decline in May to the lowest level in nearly two years. The drop reflected heavy intervention by Bank Indonesia to support the currency and prompted Fitch Ratings to flag rising risks to Indonesia’s credit profile.
Investors are also awaiting June consumer sentiment and May retail sales figures for fresh indications of domestic demand. In external accounts, Indonesia recorded its first trade deficit since 2020 in May, as exports declined while imports remained firm, eroding support from the country’s trade surplus.
Even so, losses in the rupiah were limited by signs of fiscal restraint, including news that the government is seeking additional cuts to budget allocations for President Prabowo’s free meal program to ease pressure on public finances. Softer oil prices and ongoing support from the biodiesel program are also helping to mitigate external vulnerabilities.
