The USD/IDR pair attracted buyers near the 16,550 mark during the Asian session, recovering from a drop following its highest level since 1998. Prices returned to 16,600 but remained below the daily peak.
Support for the Indonesian Rupiah came from Bank Indonesia’s recent market interventions aimed at restoring confidence. However, political instability and concerns about President Prabowo Subianto’s policies limited the effectiveness of this support.
Usd Strength Amid Tariff Actions
The USD gained traction, influenced by trade tariffs imposed by the US President. His announcement of secondary tariffs on Venezuela and potential retaliatory tariffs on 15 trading partners adds to the upward pressure on USD/IDR.
Despite the USD’s recovery close to a three-week high, there are expectations that the Federal Reserve will likely resume rate cuts, which may constrain further gains in the USD/IDR pair. The Fed forecasts two rate cuts by the end of the year amid uncertain trade impacts.
What we are witnessing is an active defence of the Rupiah by Bank Indonesia, as they attempt to stabilise sentiment following the currency’s decline. Market interventions have provided momentary strength, but these measures appear to be competing against larger concerns surrounding Prabowo’s policy direction. Political uncertainty, especially around economic governance, has dampened confidence, limiting how much support these actions provide.
Meanwhile, on the US side, tariff decisions are causing movement in trade-linked currencies. Additional import duties on Venezuela and potential retaliatory tariffs against major trading partners reinforce demand for the Dollar. The focus appears to be on protecting domestic industries, but these policies inadvertently apply more pressure on emerging market currencies, including the Rupiah.
Impact Of Fed Rate Expectations
However, the Fed’s stance is a balancing factor. While the Dollar has firmed up near recent highs, expectations for rate reductions by year-end add a layer of caution. If the Federal Reserve proceeds with the anticipated two cuts, this could put a cap on further appreciation. There is still uncertainty about how trade policies will influence inflation and economic growth, which means traders should consider both the short-term tariff impact and the medium-term effects of monetary policy adjustments.
For those in derivatives markets, this translates into a need for vigilance. With the Rupiah vulnerable to both domestic and external pressures, sudden swings can emerge. On one hand, Bank Indonesia’s presence in the market signals an effort to curb excessive weakness, but on the other, tariff-related shifts and Fed expectations create a conflicting dynamic around the Dollar. Managing exposure accordingly, particularly with attention to rate expectations and upcoming policy developments, will remain essential in the coming weeks.
