FX.co ★ Rupiah Stays Range-Bound as Dollar Strength, Inflation Risks Persist

The Indonesian rupiah traded around IDR 17,900 per U.S. dollar on Tuesday, remaining stuck in a tight range as the dollar index hovered near an 18-month high ahead of key U.S. inflation data. Sentiment was further dampened by external risks, with the IMF warning that geopolitical tensions and potential energy supply disruptions could pressure oil-importing economies such as Indonesia.

On the domestic front, sustained food price pressures are likely to keep inflation elevated through year-end, complicating Bank Indonesia’s efforts to balance growth support with currency stability. Governor Destry Damayanti reiterated the central bank’s independence in setting interest rates, despite closer policy coordination with the government, in an effort to allay concerns about political interference.

Foreign exchange reserves were largely unchanged in September, holding near a five-month high. Even so, a persistent current account deficit and tighter global financing conditions continue to leave the rupiah vulnerable to swings in foreign capital flows.