FX.co ★ Rupiah Strengthens Further Despite Oil Price Risks

The Indonesian rupiah strengthened to below IDR 17,600 per U.S. dollar on Wednesday, extending its recent advance on growing optimism over the country’s external position. Foreign exchange reserves climbed to a five-month high in August, supported by government external loan withdrawals, bolstering expectations that Indonesia’s financial buffers will remain robust in the coming months. Domestic sentiment also improved, with consumer confidence rising to a three-month high in August on the back of stronger household finances and a more positive economic outlook. At the same time, authorities stepped up market interventions to contain food price volatility after annual inflation accelerated to 3.19% in August. The rupiah’s gains were limited, however, by concerns that oil prices near USD 100 per barrel could pressure the state budget. Traders also remained cautious ahead of July retail sales data, following a third consecutive monthly decline in June. On the global front, the dollar index stabilized after recent losses, as higher oil prices reignited inflation concerns and scaled back expectations for aggressive Federal Reserve rate cuts.