USD/IDR Rises to 17,845 as Hawkish Fed & BI Signals Loom

Key Moments:

Dollar Strength Pressures Rupiah

USD/IDR added to its gains for an eighth consecutive session, hovering around 17,850 during Asian trading on Monday, as the Indonesian Rupiah weakened against a firmer US Dollar (USD). The pair stayed supported by a hawkish market view on the Federal Reserve’s policy path.

Last week, the US Federal Reserve implemented a 25-basis-point rate increase, its first in three years, in an effort to tackle elevated inflation. Policymakers also signaled that further rate hikes are likely in the coming months.

According to the CME FedWatch tool, markets were pricing in close to a 56.5% probability of another US rate hike at the Fed’s next meeting in October, compared with roughly 42.5% one week earlier.

Fed Communication Remains Hawkish

Fed Chair Kevin Warsh reinforced the focus on inflation, stating that “the plain fact is that inflation is too high and has been for too long.” He added, “This summer’s inflation readings do not tell me that underlying trends have meaningfully improved.”

Bank Indonesia Meeting in Focus

Traders were positioning around Bank Indonesia’s (BI) upcoming policy decision this week, with the central bank scheduled to begin its two-day meeting on Tuesday. The gathering follows BI’s August decision to keep its benchmark interest rate unchanged at 5.75% for a second straight month, pausing after a cumulative 100 basis points of hikes since May.

USD/IDR Technical Picture

On the daily chart, USD/IDR was last seen near 17,850, consolidating after a recent rebound. Price action was holding just below the short-term nine-day Exponential Moving Average (EMA) and above the medium-term 50-day EMA, leaving the broader technical stance neutral with a modest bullish bias.

The 14-day Relative Strength Index (RSI) stood at 57.4559, in positive territory but below levels associated with overbought conditions. This configuration pointed to strengthening bullish momentum without clear signs of upside exhaustion.

On the upside, a daily close above the nine-day EMA around 17,765 would further confirm buyers’ dominance and pave the way for additional recovery targets. A sustained move through the 50-day EMA near 17,799 would point to a more enduring bullish phase for USD/IDR.

On the downside, any retracement that fails to hold above the 50-day EMA would expose recent reaction lows. A deterioration in momentum would likely emerge if the RSI drifts back toward the mid-50s area.

Kashkari Remarks and Fed Sentiment Metrics

Kashkari’s latest comments registered a score of 6.2 on the FXS Speechtracker, almost matching the historical average of 6.3 and indicating a broadly steady, moderately hawkish tone. His emphasis that inflation “remains too high” and is not solely driven by oil, together with references to robust growth, a resilient US economy, improving productivity, and a still-strong labor market, highlighted a preference for keeping monetary policy restrictive for an extended period, even as he expressed hope that real-economy dynamics would help reduce inflation. His observation that the bond market is the Treasury’s responsibility also separated the Fed from recent moves in yields, centering attention on the inflation and growth backdrop.

The FXS Fed Sentiment Index declined by 1.47 points to 150.61, reflecting a slight easing in perceived hawkishness compared with the previous reading. Nonetheless, with the gauge remaining well above the neutral level of 100, the Fed stayed firmly in hawkish territory, aligning with a Kashkari speech viewed as only marginally less hawkish than its historical norm on the FXS Speechtracker.