The Indonesian Rupiah (IDR) extended its gains for a sixth consecutive day, with the USD/IDR pair trading around 17,940 during Asian hours on Tuesday, as positive sentiment emerged following Indonesia's plans to develop the Indonesia International Financial Center (PFII) in Jakarta. The PFII aims to position Jakarta as a competitive regional financial hub by permitting transactions in foreign currencies and adopting English as an operating language, which has bolstered investor confidence in the IDR [1].
Despite this support, the Rupiah's appreciation was tempered by market caution ahead of Bank Indonesia’s (BI) upcoming policy decision. The central bank began its two-day meeting after having raised interest rates by a cumulative 100 basis points between May and June to support the domestic currency. Additional pressure on the Rupiah stemmed from rising global oil prices, which have raised fiscal concerns, although Indonesia's budget execution remained broadly on track for the first half of 2026 [1].
Moody’s Ratings maintained a cautious outlook on Indonesia, citing ongoing policy uncertainty and risks to fiscal sustainability. Martin Petch, Vice President in Moody’s sovereign risk division, stated that the balance of risks has turned slightly more negative since the agency downgraded Indonesia’s outlook to negative in February. He highlighted that fiscal outcomes for both this year and next are under strain due to significantly increased subsidy costs, particularly after the escalation of the Iran war [1].
On the geopolitical front, risk aversion in the market eased as Iranian officials reported receiving mediator proposals aimed at de-escalating tensions with the United States, with some reports suggesting the possibility of a 10-day ceasefire. According to Axios, US President Trump is considering a temporary ceasefire to reopen the Strait of Hormuz or launching a joint military campaign with Israel, while US forces continue to assemble in the region as diplomatic talks progress [1].
CONCLUSION
The Indonesian Rupiah found support from Jakarta's financial hub ambitions and easing geopolitical tensions, though gains were limited by fiscal concerns and policy uncertainty. Moody’s maintained a cautious stance, highlighting ongoing risks to Indonesia’s fiscal outlook. Market sentiment remains watchful ahead of Bank Indonesia’s policy decision and further geopolitical developments.