FX.co ★ Rupiah Firms on Dollar Weakness, Reserve Boost

The Indonesian rupiah strengthened to below IDR 17,650 per U.S. dollar on Tuesday, reversing earlier losses as broad dollar weakness underpinned the currency. Gains in the yen, driven by expectations of more aggressive tightening by the Bank of Japan and ongoing carry-trade unwinding, further reinforced the broader move in foreign exchange markets.

On the domestic front, sentiment improved after Finance Minister Purbaya Yudhi Sadewa expressed confidence that GDP growth would remain solid in the third and fourth quarters despite recent natural disasters, emphasizing that the state budget was not facing any significant risks. The rupiah also drew support from stronger external buffers, with foreign exchange reserves in August rising to a five-month high.

Still, further appreciation was limited by inflation concerns. Local media reported that Bank Indonesia and the government had intensified joint market interventions to curb volatile food prices, amid annual inflation of 3.19% in August. Investors also remained cautious ahead of August consumer confidence data due on Wednesday, followed by retail sales figures later in the week.