02/07/26

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USD/IDR eased slightly after opening with a bullish gap, but it remained on track to post a fourth straight day of gains, trading near 18,030 during Asian hours on Thursday. The pair lost some momentum as the US dollar steadied following Federal Reserve Chair Kevin Warsh’s relatively restrained remarks at the ECB Forum on Central Banking on Wednesday.

Warsh avoided offering direct guidance on the Fed’s July policy decision. He reaffirmed that inflation is still too high and repeated the central bank’s commitment to its 2% inflation goal and institutional independence, but the overall message was seen as less aggressive than markets had expected. He also said he personally favors reducing the Fed’s bond holdings, although any move on the balance sheet would only come after extensive public preparation.

The dollar also faced pressure from improving risk appetite as geopolitical tensions in the Middle East showed signs of easing. Officials in Qatar said discussions between US and Iranian diplomats on a memorandum of understanding had made positive progress, with both sides agreeing to continue talks. US Vice President JD Vance also said the Doha discussions were proceeding well and that formal negotiations on the nuclear issue are expected soon.

At the same time, weaker US data added to the shift in market sentiment. The June ADP Employment Change report showed private payroll growth of 98,000, well below expectations and slower than May’s pace. The ISM Manufacturing PMI also slipped, suggesting softer conditions in the factory sector. Together, these figures reduced expectations for a more aggressive Fed stance and redirected investor attention toward the upcoming Nonfarm Payrolls report for clearer signals on labor-market strength and monetary policy.

On the Indonesian side, recent data showed that the trade balance unexpectedly moved to a $1.61 billion deficit in May, the first shortfall since April 2020. Exports fell while imports rose sharply, adding pressure to the external accounts. Inflation also climbed to a three-month high in June, driven largely by food prices. Fitch Ratings warned that a prolonged decline in foreign exchange reserves could eventually weigh on Indonesia’s credit profile.