The Indonesian rupiah has recently faced significant pressure, falling to a three-week low as emerging Asian equities also declined sharply. This downturn has been largely attributed to a strong US jobs report released on January 13, 2025, which has led to reduced expectations for interest rate cuts by the US Federal Reserve. The rupiah and the Malaysian ringgit both weakened by approximately 0.6%, while stocks in Thailand and Malaysia slipped by 1% each, and Philippine stocks declined by 1.4% [cd164083].
Bank Indonesia (BI) had previously intervened in the foreign exchange market on January 2, 2025, to stabilize the rupiah after it fell by 1% against the US dollar. The earlier decline was attributed to insufficient domestic supply during the New Year holidays and global economic factors, including the sentiment surrounding US policy under President-elect Donald Trump [53802db1].
Despite the recent interventions, analysts from Barclays predict that there will be no rate cuts from Bank Indonesia this year, reflecting a cautious outlook amid ongoing global economic uncertainties. The US dollar has reached its highest level in over two years, and the 10-year US Treasury yield hit a 14-month high, further complicating the situation for emerging market currencies [cd164083].
The broader context includes concerns over the US-China trade war and rising global food prices, which could impact the Indonesian economy. Experts emphasize that maintaining a stable exchange rate is crucial for supporting economic growth and attracting investment in Indonesia [1c5bd709].