Rupiah weakens driven by expectations of Fed interest rate hikes
The Rupiah is expected to remain under pressure against the US Dollar due to expectations of Federal Reserve interest rate hikes and continuously increasing US bond yields.
At the start of trading on Tuesday, the Rupimos exchange rate against the US Dollar weakened by 19 points, or 0.11 per cent, to Rp17,997 per US Dollar, compared to the previous close of Rp17,978 per US Dollar.
Lukman Leong, an analyst at Doo Financial, stated that the Rupiah’s weakness was triggered by expectations of a Federal Reserve interest rate increase. “The Rupiah is expected to remain under pressure against the US Dollar due to expectations of Fed rate hikes and rising US bond yields,” he told ANTARA in Jakarta on Tuesday.
Citing Xinhua, investor markets suggest an increase in expectations regarding further policy tightening by the Federal Reserve. According to CME FedWatch data, market participants estimate approximately a 70 per cent chance of a quarter-point interest rate hike at the Fed’s meeting on 28 October. This follows the central bank’s first rate hike since 2023, which occurred on 16 September, raising rates to a range of 3.75 per cent to 4 per cent.
Leong believes these rising expectations are influenced by the stance of US President Donald Trump, who rejected the latest Iranian proposal presented to Washington during indirect negotiations in New York this week, as reported by Anadolu. Tehran proposed reopening strategic waterways and resuming nuclear talks within one week in exchange for the lifting of Washington’s naval blockade, the removal of sanctions on Iranian oil sales, and the restoration of a regional ceasefire. However, the US is reportedly considering new strikes following the US mid-term elections in November 2026.
“Investors also tend to be cautious during this data-heavy week featuring important economic indicators, as traders await the release of the US JOLTS (Job Openings and Labor Turnover Survey) data tonight. JOLTS is expected to show 7.24 million job openings, slightly lower than the 7.27 million recorded last month,” Leong added.