The USD/IDR pair is experiencing an upward trend, trading above 16,600 during European hours on Tuesday. It is nearing the high of 16,800, the highest since June 1998, driven by concerns over political uncertainty and capital outflows in Indonesia.
Bank Indonesia has intervened in the currency market to counter the Rupiah’s decline. An official stated that steps were taken to stabilise the spot currency, bond markets, and domestic non-deliverable forwards.
Impact Of Foreign Exchange Demand
Additionally, genuine foreign exchange demand impacts the IDR’s depreciation. Traders are cautious due to the upcoming tariff announcement from US President Donald Trump.
The US dollar’s strength is supported by robust S&P Services PMI data, increasing to 54.3 in March, while the Composite PMI reached 53.5. Atlanta Fed President Raphael Bostic noted that inflation progress may be slower, adjusting 2025 rate cut projections downward due to ongoing price pressures.
The Indonesian Rupiah weakening beyond 16,600 against the US dollar is not just a reflection of local pressures but also broader market forces at play. With the pair approaching levels not seen since the late 1990s, it is clear that external risks are combining with domestic uncertainty, making the outlook more volatile.
Authorities are stepping in, with Bank Indonesia confirming intervention efforts across multiple fronts. By targeting the spot market, bonds, and domestic forwards, the aim is to curb excess volatility and provide stability. However, foreign exchange demand remains strong, which suggests that the currency could face continued depreciation pressure despite these efforts.
Meanwhile, currency traders are monitoring upcoming policy decisions from Washington. A pending tariff announcement from the US President is adding another layer of uncertainty, as it could impact global trade flows and investor sentiment in emerging markets.
US Economic Strength And Policy Outlook
On the US side, economic data continues to bolster the dollar’s strength. The S&P Services PMI exceeding expectations at 54.3, alongside a composite reading of 53.5, indicates that the American economy remains strong. Furthermore, Bostic at the Federal Reserve has highlighted that inflation is proving stubborn, leading to a reassessment of rate cut expectations for next year. This adds another layer of support for the greenback.
For those involved in derivatives trading, the movement in the USD/IDR pair demands close attention. With Jakarta’s policymakers actively intervening while external factors continue to push against them, risk management becomes even more important. The market would do well to factor in not just the central bank’s actions, but also political shifts, trade developments, and shifting expectations in US monetary policy.
