Rupiah strengthens driven by rising expectations of US dollar weakness

Jakarta (ANTARA) - The rupiah exchange rate against the US dollar at the close of Friday’s trading moved stronger by 37 points or 0.21 per cent to Rp17,642 per US dollar, compared to the previous close of Rp17,679 per US dollar.

Chief Economist of Permata Bank, Josua Pardede, stated that the rupiah’s strengthening was influenced by increasing expectations of a decline in the US dollar’s value.

“The growing expectation of further US dollar weakness, amidst the continued appreciation of the yen, has supported the rupiah’s strengthening trend,” he told ANTARA in Jakarta on Friday.

He explained that investors view the potential for coordinated yen intervention and interest rate hikes by the Bank of Japan (BoJ) as factors that could further reduce demand for the US dollar. Consequently, investors are shifting portions of their assets from the US dollar to Asian and emerging market currencies, thereby supporting the rupiah’s appreciation.

On the other hand, dovish statements from Federal Reserve official Christopher Waller, who expressed a preference for maintaining the current policy stance if inflation continues to moderate, also influenced the rupiah’s strength.

“These dovish statements have lowered expectations for interest rate hikes at the September 2026 FOMC (Federal Open Market Committee) meeting, further pressuring demand for the US dollar. As of this morning, the market-reflected probability of an interest rate hike at the September 2026 FOMC meeting stands at only around 50 per cent,” said Josua.

Bank Indonesia’s Jakarta Interbank Spot Dollar Rate (JISDOR) also moved stronger today to the level of Rp17,636 per US dollar from the previous level of Rp17,689 per US dollar.