Indonesian Rupiah struggles amid foreign-exchange demand, portfolio outflows

USD/IDR recovers its recent losses from the previous trading day, trading around 17,980 during the Asian hours on Monday. The pair gains ground as the Indonesian Rupiah (IDR) faces selling pressure, driven by robust foreign-exchange demand among importers and ongoing portfolio outflows from domestic assets, according to a central bank official.

Meanwhile, traders remain cautious ahead of critical economic releases scheduled for later this week, including Indonesia’s August trade data, September inflation figures, and manufacturing activity metrics.

The USD/IDR cross appreciates as the US Dollar (USD) receives support from hawkish signals from Federal Reserve (Fed) officials. Traders are turning their focus toward key economic indicators this week, including key US employment data and the Fed’s preferred inflation gauge.

Last week, Cleveland Fed President Beth Hammack warned against allowing the public to accept elevated prices as the norm. Echoing this sentiment, Philadelphia Fed President Anna Paulson noted that modest further tightening may be warranted. As a result, CME FedWatch Tool suggests that money markets are now pricing in a 65.9% chance of a benchmark rate hike at the October Fed meeting, up from 57.6% a week ago and just 9.4% a month ago.

Traders are closely tracking geopolitical developments in the Middle East. US President Donald Trump recently rejected Iran’s proposal to reopen the Strait of Hormuz, stating that Tehran had overplayed its hand, though he noted negotiations are expected to resume this week. Furthermore, President Trump expressed confidence that the conflict with Iran would conclude soon, while keeping open the possibility of additional military strikes before the midterm elections.