Rupiah weakens on concerns over prolonged high Fed interest rates

The rupiah exchange rate weakened by 72 points, or 0.40 percent, to Rp17,931 per US dollar on Wednesday morning, compared to the previous close of Rp17,859 per US dollar. Doo Financial Futures analyst Lukman Leong stated that the depreciation was triggered by market concerns that the Federal Reserve will keep interest rates elevated throughout 2026. “The rupiah is expected to continue weakening against a strengthening US dollar amid strong global risk-off sentiment driven by fears of persistently high interest rates,” he said. Citing Anadolu, the Fed is anticipated to maintain a tight policy stance throughout 2026 and into next year, with rising expectations of a shift towards tighter monetary policy increasing market risk. However, Leong noted positive news from MSCI, which continues to classify Indonesia’s equity market as an emerging market, potentially lending support to the rupiah. “According to the MSCI report, the main considerations were strong economic fundamentals, adequate liquidity and market capitalisation, and successful capital market reforms by authorities that have convinced institutional investors,” he added.