Rupiah weakens amid expectations of prolonged high US interest rates

Jakarta (ANTARA) — The rupiah closed trading in Jakarta on Tuesday down 27 points or 0.16 per cent at Rp16,829 per US dollar, from a previous level of Rp16,802 per US dollar.

Taufan Dimas Hareva, Head of Research and Development at the Indonesia Commodity and Derivatives Exchange (ICDX), said the rupiah’s depreciation was triggered by expectations that US interest rates would remain elevated for longer.

Citing Xinhua, the CME FedWatch Tool reported that the probability of the Federal Reserve keeping interest rates steady at the March 2026 Federal Open Market Committee (FOMC) meeting had risen to 94 per cent, up from approximately 80 per cent.

“The rupiah’s 27-point decline from its previous position of Rp16,802 reflects external pressures that continue to dominate financial markets. The strengthening of the US dollar has occurred alongside expectations that United States interest rates will remain high for longer,” he told ANTARA in Jakarta on Tuesday.

Additionally, relatively solid US economic data and attractive US government bond yields also contributed to the rupiah’s weakening.

The Dallas Fed Manufacturing index reached 0.2, up from a previous reading of -1.2. Meanwhile, the Chicago National Activity Index came in at 0.18 points, higher than its previous reading of -0.21.

“These conditions are driving a shift in global capital flows towards dollar-based assets and increasing risk aversion towards emerging market currencies, including the rupiah,” Taufan explained.

On the domestic front, he continued, the market is monitoring the consistency of monetary policy and exchange rate stabilisation measures by the authorities. Although Indonesia’s macroeconomic fundamentals such as growth and inflation remain well-maintained, the dynamics of foreign capital flows in the bond and equity markets continue to be a determining factor in rupiah volatility.

Demand for foreign currency to meet import needs and external debt obligations is also exerting short-term pressure.

“Overall, the combination of strong global sentiment and technical domestic factors is likely to keep the rupiah’s movement volatile in the near term,” he said.

Bank Indonesia’s Jakarta Interbank Spot Dollar Rate (JISDOR) also weakened on the day to Rp16,830 per US dollar, from a previous level of Rp16,818 per US dollar.