FX.co ★ Rupiah Extends Drop as Policy Meeting Begins

The Indonesian rupiah edged closer to IDR 16,690 per dollar on Tuesday, continuing its decline from the previous session as Bank Indonesia commenced its two-day policy meeting. Market consensus suggests that the central bank will maintain the current key rates for the third consecutive meeting. However, officials have upheld a dovish stance after executing a total reduction of 150 basis points since September 2024. Governor Perry Warjiyo indicated that any additional rate cuts would be contingent upon both domestic and global conditions, emphasizing that domestic inflation is expected to remain within the central bank’s target range through 2026. Despite plentiful liquidity in the banking system, weak credit demand—highlighted by the slowdown in loan growth to 7.36% in October from 7.7% in the previous month—has bolstered expectations that policy measures may be necessary if economic growth does not pick up, exerting additional pressure on the rupiah. The currency has depreciated approximately 3.7% this year, making it one of Asia's weakest performers. Globally, the U.S. dollar index lingered near its two-month low, as markets anticipated the delayed release of U.S. employment figures and November's Consumer Price Index data.