FX.co ★ Rupiah Extends Gains on FDI Boost, Set for Modest Weekly Rise

The Indonesian rupiah traded around IDR 17,960 per U.S. dollar on Friday, extending its advance for a fourth consecutive session. Support for the currency came from robust foreign direct investment, which jumped 27.4% year-on-year in the second quarter, underscoring resilient investor confidence.

At the same time, the government is preparing measures to stabilise food prices amid El Niño-related supply risks, following a rise in June headline inflation toward the upper end of Bank Indonesia’s target range. For the week, the rupiah was on track for a modest 0.2% gain, recovering some ground after earlier weakness, helped by S&P’s decision to reaffirm Indonesia’s investment-grade sovereign rating with a stable outlook.

Upside for the currency, however, was limited by higher global oil prices and reports of fuel shortages in Sumatra. Market participants also remained cautious ahead of Bank Indonesia’s policy meeting next week, after the central bank delivered a cumulative 100 basis points of rate hikes in May and June.

Externally, a softer U.S. dollar lent additional support. The dollar index was little changed on Friday but headed for a weekly decline, as cooler U.S. inflation data tempered expectations of further interest rate increases by the Federal Reserve.