The Indonesian Rupiah (IDR) weakened against the US Dollar (USD), with the USD/IDR pair rising for the second consecutive day and trading around 18,040 during Asian hours on Monday. This movement is attributed to prevailing market expectations of Federal Reserve (Fed) interest rate hikes later this year, as indicated by the CME FedWatch tool, which shows a 77.3% probability of a Fed rate hike by year-end [1].
Market participants are closely monitoring upcoming US economic data, including the Institute for Supply Management’s (ISM) Services Purchasing Managers’ Index (PMI) due later in the day, and the release of the Fed’s June policy Meeting Minutes on Wednesday, both of which could provide further clarity on the future path of US interest rates [1].
Despite the current strength in the US Dollar, last week’s disappointing US labor data has led markets to scale back expectations for a September rate hike. US Nonfarm Payrolls (NFP) increased by only 57,000 last month, significantly below the forecasted 110,000, although the unemployment rate unexpectedly declined to 4.2% from May’s 4.3%. The sharp slowdown in hiring points to a broader economic cooldown in the US [1].
In Indonesia, attention is also focused on the upcoming release of June foreign exchange reserves data on Wednesday. In May, reserves fell to a near two-year low after declining for five consecutive months, a trend attributed to heavy central bank intervention to support the rupiah. This ongoing drawdown has raised concerns, with Fitch Ratings recently warning of potential risks to Indonesia’s credit profile [1].
CONCLUSION
The Indonesian Rupiah remains under pressure amid strong US Dollar demand driven by Fed rate hike expectations, though recent weak US labor data has tempered some market optimism. Investors are awaiting key US and Indonesian data releases this week, which could further influence currency movements and market sentiment.