FX.co ★ Rupiah Holds Near IDR 17,820 Following BI Rate Move

The Indonesian rupiah traded around IDR 17,820 per U.S. dollar on Wednesday afternoon, extending its recent gains after Bank Indonesia left its benchmark interest rate unchanged at 5.75% for a third consecutive month, as widely expected. This was the first policy meeting chaired by newly appointed Governor Destry Damayanti and came on the heels of a cumulative 100-basis-point hike delivered over three moves in May and June, when policymakers tightened policy to shore up the currency after it hit record lows against the dollar.

While the rupiah has since clawed back some losses, it has come under renewed pressure in recent weeks as worries over Indonesia’s fiscal outlook have intensified, driven by higher oil prices and a legislative push to revise the 2003 State Finance Law to permit a budget deficit above 3% of GDP. The currency continued to find some support from a still-wide interest-rate differential, though its advance was capped by a stronger U.S. dollar. The dollar index hovered near an eight-week high as hawkish signals from the Federal Reserve reinforced expectations for further rate hikes later this year.