Indonesian Rupiah remains under pressure amid shifts in Asian forex markets

• Shifts in Asian currency markets weigh on the Indonesian Rupiah as tech-sector volatility and global risk sentiment drive trading.
• Higher oil prices add to Indonesia’s import bill and put pressure on its fiscal position as a net oil importer.
• Lower US bond yields and reduced expectations of Fed rate rises limit the US Dollar’s scope for gains.

At around 18,140 in Friday’s Asian session, USD/IDR is recovering after two consecutive days of declines. The advance comes as changes across Asian foreign exchange markets put pressure on the Indonesian Rupiah (IDR), with global risk sentiment and volatility in the technology sector largely driving those shifts.

Higher crude oil prices are lifting Indonesia’s import bill and placing pressure on its domestic fiscal position, weighing on the Indonesian Rupiah given the country’s status as a net oil importer. Stronger corporate demand for dollars compounds these pressures. Major Indonesian companies, including state-owned enterprises, are buying the US currency to meet offshore debt commitments, pay energy import bills and fund capital expenditure.

Indonesia’s Q3 growth exceeds forecasts

Indonesia’s latest activity figures exceeded expectations, according to analysts at MUFG, who describe Q3 GDP growth as “accelerating to 5.47%yoy from 5.29% in Q2, beating the 5.2% consensus.” In their view, the better-than-forecast result demonstrates the economy’s resilience heading into the second half of the year.

Broad caution across markets lent support to the US Dollar (USD) as investors looked ahead to the forthcoming US Nonfarm Payrolls (NFP) report. The release is expected to be pivotal in determining market expectations for the Federal Reserve’s (Fed) December policy decision.

Falling US bond yields could, however, limit further gains for the dollar. Oil prices retreated following a Democratic sweep, amid speculation that the election result would hasten an end to the Iran war. This also led traders to scale back expectations of US Federal Reserve (Fed) rate rises. According to CME’s FedWatch tool, markets currently assign nearly a 70.9% probability to a December rate increase. The Democrats’ victory has also fuelled expectations of political deadlock in Washington, potentially curbing government spending and, ultimately, slowing economic growth.