Indonesian Rupiah faces pressure amid fiscal concerns
Strong US manufacturing data boosts expectations for an October Fed rate hike to 69.7%.
Indonesia's currency, the Indonesian Rupiah (IDR), is experiencing increased pressure as fiscal concerns arise amid rising oil prices. The US Dollar (USD) has gained strength against the Rupiah, trading at around 17,920 during Asian hours on Thursday. This comes after a strong showing for US manufacturing data, which boosted expectations of a Federal Reserve (Fed) rate hike in October.
The Indonesian central bank, Bank Indonesia (BI), maintained its benchmark interest rate at 5.75% during its first policy meeting under new Governor Destry Damayanti. This move follows three earlier rate hikes in May and June to support the currency after it hit record lows against the USD. The USD/IDR pair may continue to appreciate as the US Dollar strengthens from ongoing hawkish sentiment regarding the Fed's policy outlook.
Market expectations for an October Fed rate hike have surged to nearly 69.7%, up from 48.7% last week. Investors are now closely watching the upcoming US weekly Initial Jobless Claims report, as Fed officials continue to support recent rate increases and caution against persistent inflation risks.
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