The Indonesian Rupiah (IDR) has held its ground against the US Dollar (USD), with the USD/IDR pair trading around 17,880 during Asian hours on Friday after three days of losses [1]. Market participants are exercising caution ahead of President Prabowo Subianto’s 2027 budget address to parliament later in the day, which is expected to prioritize domestic consumption despite declining approval ratings and investor concerns regarding commodity export restrictions [1]. Attention is also focused on Bank Indonesia’s upcoming policy meeting, the first since Governor Perry Warjiyo’s sudden departure and following a cumulative 100-basis-point rate hike across May and June [1].
The USD is facing downward pressure due to a softer-than-expected US inflation report. The Bureau of Labor Statistics reported that US wholesale costs for goods and services were flat in July, cooling more than the anticipated 0.2% growth, after a revised 0.1% decline in June [1]. The core Producer Price Index (PPI), excluding food and energy, rose 0.2%, slightly below market consensus of 0.3%. On an annual basis, headline PPI climbed 4.7% year-over-year in July, while core PPI increased by 4.2% [1]. These cooling inflation metrics have shifted expectations regarding Federal Reserve policy, with the CME FedWatch Tool indicating a 34.8% probability of a US rate hike at the upcoming September meeting, down from 40% immediately after the PPI data release [1].
Rabobank’s Senior FX Strategist Jane Foley notes that "Fed rate hike speculation has recently suffered a setback on the back of recent US data releases," suggesting the possibility of further weakness for the USD [1]. However, Foley cautions that this softer Dollar outlook remains vulnerable to renewed energy market stress, stating that "the view could still be thrown off course if oil prices spike higher again" [1].
Market attention is also turning toward the upcoming US July Retail Sales data, which is scheduled for release later in the day and could further influence currency movements [1].
CONCLUSION
The Indonesian Rupiah remains stable as traders await key domestic and US economic events, with cooling US inflation data reducing expectations for a Federal Reserve rate hike. While the Dollar outlook has softened, analysts warn that energy market volatility could quickly alter sentiment. Overall, market participants are cautious, awaiting further clarity from both Indonesia’s budget address and US economic releases.