FX.co ★ Rupiah Steady as Bank Indonesia Pauses Tightening

The Indonesian rupiah traded largely steady around IDR 17,900 per U.S. dollar on Wednesday afternoon after Bank Indonesia unexpectedly left its benchmark interest rate unchanged at 5.75%, as policymakers evaluated the impact of earlier tightening. The move marked a pause following a cumulative 100 basis points of rate hikes in May and June, which were aimed at supporting the currency and curbing inflationary pressures.

Despite this aggressive tightening cycle, the rupiah has remained under pressure, having lost roughly 7% against the dollar so far this year. External risks continued to weigh on sentiment, with renewed hostilities between the United States and Iran and threats to shipping in the Strait of Hormuz heightening concerns over energy supply disruptions and higher oil prices.

For Indonesia, a net oil importer, rising crude prices risk increasing the import bill, pushing up energy subsidy costs, and intensifying inflationary pressures. At the same time, the U.S. dollar index stayed firm, further limiting the upside for regional currencies, including the rupiah.