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Indonesian rupiah slips while dollar wavers amid global risk-off

Bank Indonesia held its benchmark rate at 5.75% in July, but higher oil prices are seen as a headwind through renewed inflation pressure.

Reported · Written up by our desk · EM Currencies

The Indonesian rupiah has edged lower, trading around 18,020 during Asian hours on Friday, after gaining more than 0.5% in the prior session, FXStreet said. The pair’s near term direction is tied to shifting global risk sentiment and moves in US rates expectations.

FXStreet attributed the latest dollar pressure to a weaker US Dollar backdrop even as safe-haven demand rises on escalating conflicts in the Middle East, with an implied positive spillover for oil prices. The article links higher crude to an oil driven inflation spike that has pushed markets toward expectations the US Federal Reserve could resume rate hikes.

Bank Indonesia, meanwhile, chose to hold its benchmark interest rate steady at 5.75% in July, a decision FXStreet described as unexpected. Rather than further rate hikes to support the currency, the central bank opted to emphasize targeted currency stabilization measures and proposed defense spending cuts to help reinforce Indonesia’s broader fiscal health.

Still, FXStreet warned the rupiah’s upside may be capped by rising global oil prices, which could intensify inflationary pressures. The piece also cited CME FedWatch pricing, showing money markets at the time reflected about a 35.8% chance of a Fed rate hike this month and an 82.1% probability of at least a quarter point increase in September, as markets weigh whether conditions point to further tightening.

Latest closeWTI crude $92.23 ▲6.2%

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