Rupiah weakens to Rp18,009 amid potential Fed rate hike

The rupiah exchange rate against the US dollar weakened at the close of trading on Monday, falling 46 points or 0.26 percent to Rp18,009 per US dollar from the previous close of Rp17,963 per US dollar. Money market analyst Ibrahim Assuaibi assessed that the rupiah’s depreciation was influenced by the potential for a Federal Reserve interest rate hike. “The potential for an increase remains limited because market sentiment is still tied to the Fed’s hawkish narrative,” he said in Jakarta on Monday. According to the CME FedWatch Tool, the market now sees a 78 percent chance of a rate hike at the September 2026 meeting. At the 28-29 July 2026 meeting, the Fed is expected to keep interest rates unchanged. Other sentiment stemmed from supply chain disruptions due to the US war with Iran and Yemen’s Houthis with Saudi Arabia, which has slowed the number of commodity-carrying ships passing through the Strait of Hormuz and the Bab el-Mandeb Strait. Domestically, sentiment was influenced by the resignation of Perry Warjiyo from his position as Governor of Bank Indonesia. Senior Deputy Governor Destry Damayanti will serve as Acting Governor until a definitive governor is appointed. Bank Indonesia’s Jakarta Interbank Spot Dollar Rate also weakened to Rp17,995 per US dollar from the previous Rp17,973 per US dollar.