The Indonesian rupiah traded just below IDR 18,000 per U.S. dollar on the first trading day of August, extending its rally to a fourth consecutive session as the dollar weakened further following Japan’s confirmed yen-buying intervention. Domestically, headline inflation slowed to 2.88% in July, a three-month low and comfortably within Bank Indonesia’s 1.5%–3.5% target range, reinforcing expectations that price pressures remain contained.
Bank Indonesia reiterated its commitment to currency and financial market stability using a broad policy mix beyond interest rates, including spot FX intervention and the use of onshore and offshore NDFs to manage liquidity and attract foreign capital, complementing a cumulative 100 bps of rate hikes since May. However, rupiah gains were tempered by external concerns after June’s persistent trade deficit, driven by a sharp rise in imports. Political uncertainty also lingered, as President Prabowo has yet to nominate candidates for central bank governor following Perry Warjiyo’s abrupt departure.
