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15/07/26
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USD/IDR Falls as Rupiah Gains on S&P Rating and Fed Outlook
USD/IDR extended its decline for a second straight session on Wednesday, trading near 18,110 during Asian hours. The pair came under pressure as the Indonesian rupiah strengthened after S&P Global Ratings reaffirmed Indonesia’s investment-grade credit rating and kept a stable outlook. The decision helped reinforce confidence in the country’s sovereign profile at a time when regional currencies remain sensitive to global risk sentiment.
S&P said recent fiscal and external strains, driven by higher oil prices and rupiah weakness, are likely to be temporary. The currency also drew support from Bank Indonesia, which raised interest rates by 100 basis points between May and June. The central bank has also signaled that it stands ready to use all available monetary instruments to stabilize the rupiah if needed.
At the same time, the US dollar remained under pressure after softer-than-expected inflation data increased expectations that the Federal Reserve may slow the pace of policy tightening. US consumer prices rose 3.5% year over year in June, down from 4.2% in May and below the 3.8% forecast. On a monthly basis, headline inflation fell 0.4%, reversing a 0.5% increase in the previous month. The weaker data reinforced the view that inflation may be easing more quickly than previously expected.
Still, losses in the dollar may not be sustained for long. Demand for safe-haven assets has picked up again amid renewed tensions between the United States and Iran. The risk of further disruption around the Strait of Hormuz has lifted oil prices, adding to inflation concerns and complicating the outlook for interest rates. Market pricing now implies roughly a 50% chance of another Federal Reserve rate increase in September.
US Central Command said it carried out additional strikes against Iranian military targets along the coast and near the Strait of Hormuz. The area is a critical energy corridor, and any escalation there could have broader implications for oil markets, inflation expectations, and currency volatility in the sessions ahead.
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