Indonesian Rupiah hits record lows on MSCI index concerns, political uncertainty

USD/IDR rises after opening at a bullish gap, trading around 18,260 during Asian hours on Thursday. The currency pair climbed to a fresh record high of 18,272 amid renewed concerns over Indonesia’s emerging-market status. The latest drop followed MSCI’s decision to remove a local firm from its indexes, a fresh setback after the index provider warned last month that persistent investability issues could lead to the country being reclassified as a standalone market.

Meanwhile, political uncertainty has intensified after Vice President Gibran Rakabuming Raka resigned. His departure raises the risk of a split within the ruling coalition of Southeast Asia’s largest economy, which could complicate policymaking for an administration already facing scrutiny over broader economic management and flagship initiatives like its free school meals programme.

Additionally, the USD/IDR pair rises as the US Dollar (USD) receives support from an increasingly hawkish Federal Reserve (Fed) policy outlook, following hotter-than-expected US Consumer Price Index (CPI) inflation data.

Traders have ramped up bets on a December rate hike, especially after Fed Governor Christopher Waller noted earlier this week that he would back a quarter-point increase, or even a half-point move if inflation worsens. According to the CME FedWatch Tool, markets are now pricing in around an 87% probability of a December rate hike, alongside a nearly 13% chance of a larger 50 basis point increase.

Technical Analysis: USD/IDR reaches near overbought territory

In the daily chart, USD/IDR trades at 18,260, extending its advance above both the short-term and medium-term trend markers. The nine- and 50-period Exponential Moving Averages (EMAs) sit below price, suggesting a well-supported uptrend after the latest breakout. The 14-day Relative Strength Index (RSI) at 66.99 hovers near overbought territory, hinting at strong bullish momentum but also raising the risk of a short-term pause rather than an immediate reversal.

On the downside, initial support sits at the nine-period EMA near 18,147.87, with a deeper protective layer at the 50-period EMA around 18,010.74 if corrective pressure emerges. As long as USD/IDR holds above these moving average supports, the near-term bias remains constructive, and any dips toward the EMA cluster are likely to attract fresh buying interest.

Goolsbee flags troubling inflation persistence, reinforcing hawkish Fed tone

Fed’s Goolsbee delivered a notably more hawkish message, with an FXS Speechtracker score of 8/10 compared to the established baseline of 6.8/10, underscoring rising concern about inflation dynamics. By calling the latest CPI “borderline disturbing” and highlighting that services inflation is “not coming down,” the speech framed inflation as a “real issue” driven by both cost and demand sides, with a clear warning about overheating prices and the risk of expectations becoming unanchored. The insistence that “everything is always on the table” and that inflation must be brought back to target reinforces the likelihood of a policy stance biased toward tighter conditions, even as the job market is described as steady and stable.

The FXS Fed Sentiment Index rose by 1.69 points to 145.61, firmly in hawkish territory and consistent with the elevated FXS Speechtracker reading. This move signals that, within FXS Fed Sentiment Index metrics, Goolsbee’s remarks materially strengthened the perceived hawkish tilt of the Federal Reserve’s policy narrative.

(The technical analysis of this story was written with the help of an AI tool. Know more.)