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Indonesian Rupiah holds ground ahead of President Prabowo’s 2027 budget address

  • Traders stay cautious before Prabowo’s 2027 budget speech, as a consumption focus clashes with export curbs and falling approval ratings.
  • The US Dollar drops as weaker-than-expected US inflation data decrease Fed rate hike bets.
  • Federal Reserve rate hike expectations for September drop to nearly 35%.

USD/IDR loses ground after three days of losses, trading around 17,880 during the Asian hours on Friday. Traders remain cautious ahead of President Prabowo Subianto’s 2027 budget address to parliament later in the day.

The budget proposal is expected to prioritize domestic consumption despite declining approval ratings and investor anxiety over commodity export restrictions. Market attention is also shifting to Bank Indonesia’s (BI) policy meeting next week, its first following the sudden departure of Governor Perry Warjiyo and a cumulative 100-basis-point rate hike across May and June.

The USD/IDR pair edges lower as the US Dollar (USD) faces downward pressure following a softer-than-expected US inflation report. Market attention is now turning toward the upcoming US July Retail Sales data scheduled for release later in the day. Adding to the broader inflation picture, the Bureau of Labor Statistics reported that US wholesale costs for goods and services were flat in July, cooling more than the anticipated 0.2% growth, after a revised 0.1% decline in June. Excluding volatile food and energy components, the core Producer Price Index (PPI) rose 0.2%, coming in slightly below market consensus expectations of 0.3%. On an annual basis, headline PPI climbed 4.7% year-over-year in July, while core PPI increased by 4.2% over the same period.

These cooling inflation metrics have shifted expectations regarding Federal Reserve policy. According to the CME FedWatch Tool, markets are now pricing in a 34.8% probability of a U.S. rate hike at the upcoming September meeting, down from 40% immediately following the PPI data release.

Dollar outlook softens as Fed expectations cool but oil risks linger

Rabobank’s Senior FX Strategist Jane Foley observes that “Fed rate hike speculation has recently suffered a setback on the back of recent US data releases,” a shift that “opens the prospect of further slippage for the greenback.” She cautions, however, that this softer Dollar narrative remains vulnerable to renewed energy market stress, noting that the view “could still be thrown off course if oil prices spike higher again.”

Author

Akhtar Faruqui

Akhtar Faruqui is a Forex Analyst based in New Delhi, India. With a keen eye for market trends and a passion for dissecting complex financial dynamics, he is dedicated to delivering accurate and insightful Forex news and analysis.

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