Indonesia: Rupiah stability supports BI pause – DBS

FXStreet Insights Team FXStreet

DBS Group Research economist Radhika Rao notes Bank Indonesia (BI) kept its policy rate at 5.75% with Acting Governor Destry maintaining a neutral bias while flagging global risks. A strong domestic growth print and Indonesian Rupiah (IDR) stability underpin the decision. Policy risks are seen as externally driven, with domestic catalysts turning constructive as the government reinforces growth-supportive priorities for 2027 alongside fiscal consolidation.

BI holds rates as risks stay external

"Bank Indonesia left the policy rate unchanged at 5.75% yesterday, along expectations. Acting Governor Destry maintained a neutral bias but highlighted global risks."

"A firm 2Q domestic growth report and recent stability in the rupiah backed BI's decision to leave the benchmark rate on hold. Policy risks, at this juncture, are more external focused as the currency and bond market remain susceptible to geopolitical developments on elevated global oil as well as crack spreads, besides DM yields."

"Few changes were made to the measures announced in July, including an extension of the hedging discount to include FDI and foreign borrowings by domestic banks, in addition to portfolio investors. Add to this, a flexible rollover mechanism has been introduced to extend swaps based on the remaining life of underlying assets, subject to pre-conditions."

"Domestic catalysts have turned constructive after the government reinforced its growth-supportive focus for 2027, while maintaining fiscal consolidation (our note). We expect a rate pause in Sept, while maintaining one insurance hike in 4Q26 if financial conditions and sentiments weaken."

"Calming effect on US long-end rates (post buybacks) should relieve pressure on the backend of the regional rate curves."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

AUD/USD bounces back toward 0.6950 on fresh USD supply

AUD/USD bounces back toward 0.6950 in the Asian session on Friday. The US Dollar retreats from 17-month highs as traders take profits off the table ahead of the all-important US Nonfarm Payrolls report. Meanwhile, the Australian Dollar draws support from reviving expectations of a November interest rate hike amid elevated global yields and inflation risks.

USD/JPY struggles near 158.00 as USD retreats ahead of NFP

USD/JPY is struggling for fresh impetus near 158.00, moving away from the top end of its weekly range in the Asian session on Friday, after hotter-than-expected Tokyo CPI and amid a broad US Dollar retreat. Traders reposition themselves ahead of US Nonfarm Payrolls.

Gold fades the earlier optimism; back below $4,200

Gold could not sustain the post-NFP bull run past the $4,200 mark per troy ounce, receding toward the $4,180 region at the end of the week. The precious metal’s inconclusive price action comes amid fresh selling pressure hurting the US Dollar as investors assess the latest NFP data.

Week ahead: Fed minutes in the spotlight amid bond market rout

The first full week of October and the final quarter of the year get underway with little fanfare in terms of the economic agenda. But far from being short on excitement, the coming week will test market nerves, as government bond yields continue to soar on growing worries that the energy crisis will only get worse, fuelling inflation.

CFTC Report: Speculators turn more defensive as Oil exposure falls

The week in one sentence: During the week leading up to September 29, long positions in crude oil were significantly reduced, while short positions in the Canadian Dollar went up. In addition, the positioning of the Australian Dollar and the Japanese Yen declined, while Coffee buying stood out against a more general background of defensiveness.

The Euro is near a one-year low: Inflation could trigger its rebound, not its fall

EUR/USD has fallen to its lowest level since May 2025. The pair hit 1.1312 on Wednesday and trades well below the January peak of 1.2082. The decline reflects a powerful combination of US Dollar strength, geopolitical uncertainty and renewed concerns about Europe's exposure to higher energy prices.