Rupiah strengthens amid "wait and see" stance ahead of Fed interest rate decision

Jakarta — The rupiah exchange rate strengthened by 29 points, or 0.17 per cent, to Rp16,968 per US dollar at the opening of trading in Jakarta on Tuesday morning, compared to the previous close of Rp16,997 per dollar.

Muhammad Amru Syifa, a researcher at Indonesia Commodity & Derivatives Exchange (ICDX), stated that the rupiah moved dynamically as market participants adopted a “wait and see” stance ahead of global monetary policy decisions.

“The rupiah exchange rate in today’s trading is expected to move dynamically with a tendency towards stability or limited strengthening, as market participants maintain a ‘wait and see’ attitude ahead of global monetary policy decisions,” he told ANTARA in Jakarta on Tuesday.

The rupiah’s movement is projected to remain within the range of Rp16,900-Rp17,020 per dollar, with external factors being the primary driver. Strengthening at the opening of the session indicated short-term capital inflows, although the potential for further appreciation remains relatively limited.

Market participants are said to be focused on the direction of interest rate policy from the Federal Reserve. “If The Fed reaffirms its policy of maintaining higher interest rates for a longer period, then the US dollar is likely to continue strengthening and place pressure on emerging market currencies, including the rupiah,” he said.

Additionally, the rising yields on global bonds are increasing the attractiveness of dollar-denominated assets and could potentially trigger capital outflows. From a global perspective, escalating geopolitical tensions in the Middle East remain the primary sentiment driver, particularly as they push up energy prices.

Domestically, Indonesia’s economic fundamentals remain sufficiently solid, supported by controlled inflation and stable financial system stability. Bank Indonesia’s stabilisation efforts also play an important role in restraining rupiah volatility.

“In today’s Board of Governors meeting, Bank Indonesia is expected to hold the BI-Rate benchmark at 4.75 per cent. This policy reflects the central bank’s commitment to maintaining exchange rate stability whilst ensuring inflation remains within the 2.5 per cent target for the 2026-2027 period, amid continuing high global uncertainty,” Amru said.