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02/06/26
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USD/IDR Pulls Back as Strong Indonesia Inflation Supports Rupiah
USD/IDR eased on Tuesday after setting a fresh record high at 18,021, with the pair trading near 17,900 as the Indonesian rupiah found support from stronger-than-expected domestic inflation data. The move marked a pause in the dollar’s advance against the local currency, even as the broader US dollar remained underpinned by demand for haven assets.
Indonesia’s headline inflation rose to 3.08% in May from 2.42% in April, beating forecasts for 2.97%. The reading stayed within Bank Indonesia’s target range of 1.5% to 3.5%, but it suggested price pressures are firming again after a period of softer inflation. Core inflation also picked up, reaching 2.59%, the highest level in three months. On a monthly basis, consumer prices increased 0.28%, outpacing expectations and accelerating from April’s 0.13% rise.
Additional support for the rupiah came from signs of stabilization in the manufacturing sector. The S&P Global Manufacturing PMI returned to 50.0 in May from 49.1 in April, indicating that factory activity was broadly steady after a brief contraction. The improvement was driven mainly by domestic demand, though exports continued to face pressure from shipping disruptions linked to conflict in the Middle East.
The rupiah has also benefited from policy-related developments in Indonesia, including government efforts to increase transparency around a newly created state-owned exporter focused on key commodities. Officials hope the initiative will improve tax collection, keep more foreign-currency earnings inside the country, and strengthen US dollar liquidity in the domestic market.
Even so, the US dollar remained firm as geopolitical tensions in the Middle East continued to lift demand for safe-haven assets. Reports from Iran suggested that indirect talks with the United States had been suspended, adding to market anxiety. Further headlines pointed to broader regional risks, including possible disruption to key maritime routes such as the Strait of Hormuz and Bab el-Mandeb, which helped support the dollar and limit the rupiah’s recovery.
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