Indonesian Rupiah holds firm as BI keeps rate steady at 5.75%

Indonesian Rupiah holds ground as the BI decided to keep its interest rate at 5.75% in August.
The US Dollar weakens as market expectations for a US interest rate hike next month ease.
CME FedWatch tool suggests traders are now pricing in just a 32.8% chance of a rate hike in September.

Akhtar Faruqui FXStreet

USD/IDR depreciates after registering modest gains in the previous day, trading around 17,870 during the European hours on Wednesday. The pair holds losses as the Indonesian Rupiah (IDR) remains stronger following the release of the interest rate decision by the Bank Indonesia (BI).

Bank Indonesia kept its benchmark interest rate unchanged at 5.75% for a third consecutive meeting in August, matching market forecasts. The decision follows the sudden resignation of former governor Perry Warjiyo last month and the appointment of Senior Deputy Governor Destry Damayanti as interim chief, which sparked concerns over the central bank's independence from political pressure.

Additionally, the USD/IDR pair loses ground as the US Dollar (USD) weakens amid easing expectations of a US interest rate hike next month. Recent economic data showed that US Retail Sales dropped in July for the first time in nine months, compounding concerns after unexpected job losses last month and tame CPI inflation figures.

While the Fed left interest rates unchanged at its last meeting, three officials dissented in favor of a rate hike, prompting traders to look to the upcoming minutes for deeper insight into the division within the central bank. According to the CME FedWatch tool, traders now price in just a 32.8% chance of a rate hike at the Fed’s September meeting, down significantly from 51.2% a month earlier.

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Economic Indicator

Bank Indonesia Rate

Interest Rate Decision is announced by the Bank Indonesia. Monitary policy refers to the actions undertaken by a country's monetary authority, central bank or government to achieve certain national economic goals. It is based on the relationship between interest rates at which money can be borrowed and total supply of money.

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