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Rupiah recovery faces risk as firmer US inflation could lift yields
MUFG notes foreign ownership of Indonesia’s SRBI is about 27%, near late 2024 highs, leaving less room for Indonesia to absorb shocks.
MUFG strategist Lloyd Chan warned that upcoming US inflation data could test the recent Indonesian rupiah recovery by supporting higher US yields, which may pressure USD/IDR and challenge the pair’s break below 17,700, according to FXStreet.
Chan said Indonesia’s domestic buffers remain supportive but have limits, highlighting the impact of rising foreign ownership of outstanding SRBI, which has reached around 27%, close to previous highs seen in late 2024.
The strategist also pointed to external pressures from energy, saying higher oil prices could revive concerns about Indonesia’s fiscal risks and subsidy costs, while commodity offsets are proving insufficient to fully counter deterioration in the oil and gas trade balance.
The outlook implies a more fragile FX setup into the US inflation release, as market expectations for yields can quickly shift the USD/IDR balance, according to MUFG via FXStreet.