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Rupiah steadies near 18,100 as oil import costs pressure trade balance
USD/IDR held around 18,100 after two sessions of IDR losses, with traders looking ahead to Bank Indonesia’s meeting next week for signs of further rate tightening.
USD/IDR stabilized after two straight sessions of Indonesian rupiah weakness, trading around 18,100 in Asian hours on Thursday. FXStreet attributed the IDR’s downward pressure to surging oil import costs that stretched Indonesia’s trade balance and helped stoke inflation concerns.
The market’s focus next week is Bank Indonesia’s policy meeting, with traders assessing whether the central bank will deliver additional rate hikes. Bank Indonesia has already tightened by a cumulative 100 basis points in May and June, and investors are watching for more defensive action to support the currency.
FXStreet also linked the currency move to a firmer US dollar, saying the greenback recovered from daily losses as risk aversion picked up. The outlet pointed to US Iran tensions boosting oil prices, which can raise inflation worries and prolong expectations of higher interest rates.
While the outlook for US policy has been tempered by softer inflation data, FXStreet noted that US CPI fell to 3.5% in June from 4.2% in May, below expectations for 3.8%. However, the outlet said the prior US-Iran peace deal may no longer reflect the latest military escalation’s impact on inflation, keeping uncertainty around the Fed’s higher-for-longer stance.