FX.co ★ Rupiah Softens as Easing Outlook Weighs

The Indonesian rupiah edged closer to IDR 16,800 per dollar on Thursday, following a brief dip to 16,680 in the previous session. Market sentiment was jolted by expectations of further policy easing, as Bank Indonesia reiterated its commitment to fostering economic growth amidst an economy that remains below its potential. Concerns regarding the central bank's institutional independence resurfaced with the appointment of President Prabowo’s nephew as the new deputy governor. Nevertheless, the rupiah has appreciated approximately 0.3% this week, maintaining gains from the previous session after the central bank decided to hold monetary policy steady for the fourth consecutive time. On a positive note, loan growth accelerated to a 10-month high in December, indicating the effectiveness of the cumulative 150 basis points of rate cuts since September 2024. In international markets, the dollar index found stability after reaching a four-year low earlier this week, buoyed by Treasury Secretary Scott Bessent’s reaffirmation of the "strong dollar" policy. Meanwhile, the Federal Reserve, as anticipated, left interest rates unchanged following three rate cuts in 2025.