Key Moments
- USD/IDR trades around 18,000 in Asian hours on Friday, holding gains after a bullish gap at the open.
- Markets price in a 63.4% chance of a Fed rate hike at the September 15-16 meeting as US inflation gauges accelerate.
- Foreign investors channel roughly IDR 105 trillion into Indonesian one-year central bank securities and government bonds in June.
USD/IDR Supported by Firm US Rate Expectations
USD/IDR edges slightly lower after opening with a bullish gap, but the pair remains higher on the day and trades near the 18,000 level during Asian trading on Friday. The Indonesian Rupiah continues to face pressure as the US Dollar benefits from firmer expectations that the Federal Reserve will raise interest rates.
Data from the CME FedWatch tool shows that market participants assign a 63.4% probability to a rate increase at the Federal Reserve’s September 15-16 policy meeting. This outlook is underpinning demand for the US currency and helping USD/IDR retain most of its earlier gains.
Rising US Inflation Reinforces Fed’s Hawkish Bias
The shift toward a more hawkish policy view is being driven by stronger US inflation readings. The headline Personal Consumption Expenditures (PCE) Price Index rose to 4.1% year-over-year in May, compared with 3.3% in April. This move above the 4.0% mark for the first time in three years is being largely linked to higher energy prices associated with the Middle East conflict, reinforcing the case for additional rate hikes this year.
The core PCE index, which is described as the Federal Reserve’s preferred inflation measure, also ticked higher. It increased to 3.4% year-over-year from 3.3%, marking the strongest annual core reading since October 2023. These figures collectively keep the prospect of further tightening alive and continue to support the US Dollar’s strength against the Rupiah.
Indonesia Focuses on Inflation and Capital Flows
In Indonesia, market attention is turning to the upcoming release of June inflation data. Investors are monitoring food prices closely after El Niño-related supply disruptions led to the fastest annual inflation increase in seven months in May.
Despite these inflation concerns, broader market sentiment toward Indonesian assets has been cushioned by robust foreign portfolio inflows. International investors are reported to have invested around IDR 105 trillion in the central bank’s one-year securities and in government bonds over the course of June, providing support to domestic markets even as the Rupiah remains under pressure against the US Dollar.
US Dollar Performance Against Major Currencies
The following table presents the percentage change of the US Dollar against major currencies today. The US Dollar showed its strongest performance relative to the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.00% | -0.04% | -0.08% | -0.05% | 0.28% | 0.13% | -0.06% | |
| EUR | -0.00% | -0.05% | -0.06% | -0.01% | 0.28% | 0.10% | -0.04% | |
| GBP | 0.04% | 0.05% | 0.00% | 0.02% | 0.34% | 0.20% | -0.01% | |
| JPY | 0.08% | 0.06% | 0.00% | 0.03% | 0.35% | 0.18% | 0.00% | |
| CAD | 0.05% | 0.00% | -0.02% | -0.03% | 0.33% | 0.15% | -0.04% | |
| AUD | -0.28% | -0.28% | -0.34% | -0.35% | -0.33% | -0.16% | -0.36% | |
| NZD | -0.13% | -0.10% | -0.20% | -0.18% | -0.15% | 0.16% | -0.18% | |
| CHF | 0.06% | 0.04% | 0.01% | -0.01% | 0.04% | 0.36% | 0.18% |
The heat map reflects the percentage moves of each major currency pair. The base currency is taken from the left-hand column and the quote currency from the top row. For instance, selecting the US Dollar from the left and moving horizontally to the Japanese Yen cell provides the percentage change for USD (base)/JPY (quote).
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