FX.co ★ Rupiah Set for Weekly Decline

The rupiah traded near IDR 17,950 per US dollar on Friday, extending its recent slide as broad dollar strength persisted after the Federal Reserve reaffirmed its hawkish stance despite leaving interest rates unchanged last week. Domestically, traders turned cautious ahead of June CPI data, with food prices in focus following May’s fastest annual increase in seven months, driven in part by the effects of El Niño.

Concerns also grew that Indonesia’s 72-month streak of trade surpluses could soon end amid elevated energy imports. The rupiah has fallen about 1% so far this week, wiping out gains from the previous two weeks. However, losses were limited by reports that the government may cut more than USD 2 billion from President Prabowo’s flagship program to reinforce fiscal discipline.

Softer oil prices, which have retreated toward pre–Iran war levels, also helped ease pressure on the import bill and the budget. Meanwhile, foreign inflows have returned in June, supported by roughly IDR 105 trillion in demand for Bank Indonesia’s one-year securities and government bonds.