Indonesian Rupiah loses ground despite BI intervention
- Bank Indonesia is actively intervening in spot and NDF markets to stabilize the weakening Indonesian Rupiah.
- The IMF raised Indonesia’s 2026 growth forecast to 5.1%, driven by strong household spending.
- Hotter US CPI data boosted expectations for a potential Fed interest rate hike at the October FOMC meeting.
USD/IDR remains stronger for the second consecutive day, trading around 17,980 during Asian hours on Thursday. The currency pair appreciates as the Indonesian Rupiah (IDR) faces downward pressure, following statements from Bank Indonesia (BI) noting that the currency's trajectory remains consistent with its regional peers. To manage market volatility, the central bank reaffirmed its commitment to stabilizing the Rupiah through active interventions across spot markets as well as onshore and offshore non-deliverable forwards (NDFs). Meanwhile, Indonesia's foreign exchange reserves eased slightly in September, though they remained near a five-month high.
The International Monetary Fund (IMF) raised its 2026 growth forecast for Indonesia to 5.1%, up from an earlier projection of 5.0%. This upward revision is driven by measures designed to boost household consumption alongside an anticipated pickup in government spending. However, the IMF cautioned that ongoing geopolitical conflicts and energy supply risks could present headwinds for energy-importing economies like Indonesia.
The upside of the USD/IDR pair could be restrained as the US Dollar (USD) struggled while investors continued to evaluate the Federal Reserve’s (Fed) monetary policy outlook in the wake of stronger-than-expected inflation data.
The Bureau of Labor Statistics (BLS) reported on Wednesday that the US Consumer Price Index (CPI)—a broad measure of goods and services costs across the economy—climbed 0.6% month-over-month in September, bringing the 12-month headline rate to 3.7%. Both metrics came in higher than economists' forecasts of 0.6% and 3.6%, respectively. Meanwhile, core CPI (which strips out volatile food and energy components) advanced 0.3% for the month and rose 2.6% on an annual basis, exceeding market estimates of 0.2% and 2.5%.
This hotter-than-anticipated inflation report reinforced expectations for a potentially more hawkish Federal Reserve, bolstering arguments for an interest rate hike at the upcoming Federal Open Market Committee (FOMC) meeting on October 27–28. Following the data release, futures traders raised the probability of a rate hike at the late-October meeting to approximately 31.6%, according to CME Group’s FedWatch tool.
Technical Analysis:
In the daily chart, USD/IDR trades at 17,980, keeping a constructive bullish tone as spot holds above both the short-term and medium-term Exponential Moving Averages (EMAs). Price is trading above the nine-day EMA and the 50-day EMA, which suggests the recent recovery remains supported, while the 14-day Relative Strength Index (RSI) near 58 stays in positive territory without yet signaling overbought conditions.
On the downside, immediate support is located at the nine-day EMA at 17,944.20, with a deeper technical floor at the 50-day EMA around 17,872.47. As long as USD/IDR holds above these underlying demand zones, the near-term bias would likely stay tilted to the upside, though momentum readings hint that gains could moderate if price fails to extend decisively beyond the recent highs.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Central banks FAQs
Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.
A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.
A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.
Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.