FX.co ★ Rupiah Stays Fragile Near Record Low

The Indonesian rupiah traded near record lows around IDR 17,500 per dollar in thin holiday markets on Thursday, after briefly strengthening below 17,450 in the previous session. Sentiment was weighed down by a stronger US dollar and by rising inflation, which reinforced expectations that the Federal Reserve will maintain a hawkish stance.

Concerns have resurfaced over Bank Indonesia’s capacity to defend the currency ahead of next week’s policy meeting, with some analysts urging a rate hike to 5.0% from the current 4.75% to curb capital outflows. President Prabowo recently criticized Governor Perry Warjiyo over the rupiah’s weakness, while endorsing new measures such as tighter foreign-exchange regulations and liquidity adjustments.

Traders also stayed cautious amid fragile domestic fundamentals, declining foreign-exchange reserves, mounting fiscal pressures, and persistent foreign selling. Helping to limit losses, the government has launched a bond stabilization fund to support the debt market in the face of rising yields. The rupiah is down about 0.5% so far this week and is on track for a seventh consecutive weekly decline.