FX.co ★ Rupiah Nears Record Low Amid Dollar Strength and Outflow Risks

The Indonesian rupiah remained under pressure on Wednesday, trading around IDR 18,170 per U.S. dollar and edging closer to its July record low of IDR 18,820. The currency was weighed down by a firm U.S. dollar index ahead of the Federal Reserve’s interest rate decision, as well as mounting concerns over possible foreign fund outflows amid uncertainty surrounding Indonesia’s MSCI classification. Fiscal risks further added to the headwinds, with the government considering the introduction of free education through university, a move that could strain the budget when combined with other costly policy commitments.

External vulnerabilities persisted despite a recent trade surplus, as elevated imports and higher energy costs kept the economy exposed to geopolitical tensions in the Middle East. Annual inflation accelerated to 3.28% in September, a three-month high, driven largely by food price pressures associated with El Niño-related disruptions. At the same time, Bank Indonesia noted that the rupiah’s performance remained broadly in line with regional peers and reiterated its commitment to intervene in the market to support the currency. Investors are now focused on next week’s trade data and inflation releases for clearer signals on the rupiah’s outlook.