FX.co ★ Rupiah Retreats After Four Sessions of Gains

The Indonesian rupiah declined to approximately IDR 16,800 per dollar on Tuesday, breaking a four-day winning streak due to renewed concerns about central bank independence. Lawmakers unanimously appointed Thomas Djiwandono, President Prabowo's nephew, as deputy governor of Bank Indonesia, bypassing two experienced career bankers. This decision has sparked worries regarding potential political influence on the country's monetary policy. Concurrently, Bank Indonesia has reiterated its capacity for further monetary easing, attributing mild inflation projections for the years 2026-2027 to fall within their target range of 1.5% to 3.5%, while also focusing on fostering economic growth. The previous week, Bank Indonesia maintained its key interest rate at 4.75% for the fourth consecutive meeting, following a total reduction of 150 basis points since September 2024. However, the currency's losses were mitigated by the central bank's assurances of strategic interventions in the spot and forward markets and its commitment to pro-market operations. On the international front, the dollar index remained near a four-month low, influenced by the risks of a U.S. government shutdown and expectations that the Federal Reserve will keep rates unchanged during its inaugural meeting of the year.