FX.co ★ Rupiah Stays Weak Amid Holiday-Thinned Trade, Fed Signal Weighs

The Indonesian rupiah stayed under pressure on Thursday, trading close to IDR 17,000 per US dollar in thin, holiday-affected markets. Externally, the dollar index remained firm after the US Federal Reserve signaled it would keep interest rates unchanged until inflation shows more convincing signs of moderating.

On the domestic front, Bank Indonesia’s latest policy statement removed earlier wording about creating room to lower borrowing costs, underscoring a more cautious policy stance. At the same time, rising energy prices have intensified fears of an inflation shock, a particular vulnerability for Indonesia, which is heavily dependent on imported oil from the Middle East and has limited safeguards against supply disruptions.

Headline inflation quickened to 4.76% in February, the highest level in nearly three years and above the central bank’s 1.5%–3.5% target range. The rupiah has depreciated about 1.8% so far this year, even as Bank Indonesia has kept its benchmark rate unchanged since October. In response to mounting currency pressures, policymakers have also unveiled new measures to curb speculative activity in the rupiah, scheduled to take effect in April.