After starting with a strong gap, the USD/IDR exchanged slightly lower but stayed in a positive range, hovering around 17,880 during Asian trading hours on Thursday. The dip in the currency pair came as the Indonesian rupiah (IDR) gained traction, especially ahead of the Bank Indonesia’s (BI) policy meeting.
Market participants are increasingly factoring in a possible 25 basis point rate hike, raising the benchmark to 5.75%. This speculation follows last week’s unexpected increase of 25 basis points aimed at safeguarding the rupiah and addressing rising inflation concerns. The nation’s inflation rate jumped to 3.08% in May, up from 2.42% in April, approaching the central bank’s target ceiling of 3.5%.
The USD/IDR pair is under pressure as the US dollar (USD) has been weakening. Demand for safe-haven assets has eased, particularly after a BBC report on Wednesday evening stated that the White House confirmed a preliminary agreement between US President Donald Trump and Iranian President Masoud Pezeshkian aimed at resolving the US-Israel conflict with Iran. This strategic move follows the earlier electronic signing of an initial framework by U.S. Vice President J.D. Vance and Iranian Parliament Speaker Mohammad Bagher Ghalibaf.
Nonetheless, the U.S. dollar could see a recovery as the Federal Reserve appears more inclined to increase interest rates in the coming months. The economic forecast summary released in June indicated that half of the Federal Open Market Committee (FOMC) members anticipate at least one interest rate increase this year. Despite ongoing economic chaos stemming from the Iran situation, solid labor market data and sustained efforts to control inflation continue to create pressure for tighter monetary policy.
