FX.co ★ Rupiah Slides for 5th Session Ahead of Fed Decision

The Indonesian rupiah weakened beyond IDR 17,700 per U.S. dollar on Wednesday, marking its fifth consecutive session of losses, as the dollar index climbed to a one-month high ahead of the Federal Reserve’s policy decision. Markets broadly expect the U.S. central bank to deliver its first interest rate hike in about three years, a move that is keeping the greenback supported and putting additional pressure on emerging-market currencies.

On the domestic front, headwinds remained in place. Factory activity stayed subdued in August, household sentiment remained fragile, and retail sales growth showed clear signs of slowing. External risks also intensified, with crude oil prices climbing above US$100 per barrel amid escalating tensions in the Middle East. At the same time, elevated global bond yields and a cautious stance among foreign investors further weighed on Indonesian assets.

These developments may complicate inflation control and fiscal management for the new Finance Minister, Suahasil Nazara. Bank Indonesia is scheduled to hold its policy meeting next week, after keeping its benchmark rate unchanged for a second straight month in August, following a total of 100 basis points of tightening since May.