Why does the Indonesian Rupiah remain under pressure as domestic growth slows?

• The Indonesian Rupiah comes under pressure as fiscal sentiment deteriorates amid cuts to 2026 GDP forecasts, elevated oil prices and increasing imports.
• To sustain active currency intervention while containing costs, Bank Indonesia is making greater use of Non-Deliverable Forwards (NDFs).
• Further declines in USD/IDR are being cushioned by widespread US Dollar weakness after Democratic victories in the midterm elections.

Growing domestic concerns are weighing on the Indonesian Rupiah (IDR), keeping USD/IDR on a firmer footing for a third straight day. During Wednesday's Asian session, the pair is trading near 18,200 as it extends its advance.

Fiscal and external pressures are being compounded by high oil prices, increasing import volumes and fluctuations in export revenues. Against this backdrop, Finance Minister Suahasil Nazara cut Indonesia's 2026 growth forecast to 5.4%–5.5% from 5.6%–6% ahead of Thursday's Q3 GDP release. The revision signals a further slowdown from Q2's year-on-year growth of 5.29%.

Greater use of Non-Deliverable Forwards (NDFs) will help reduce the expense of direct spot intervention, Governor Destry indicated while reiterating Bank Indonesia's commitment to remaining active in the market. Bank Indonesia (BI) also asserted that its currency interventions have been effective.

Broad-based US Dollar weakness after Tuesday's midterm elections is, however, limiting additional upside in USD/IDR. Following the Democrats' victory in taking control of the US House of Representatives from the Republicans, market participants expect possible changes in congressional leadership and fresh uncertainty surrounding future US fiscal policy. Live figures from Decision Desk HQ show that results have been declared for 253 of the 435 House seats. Democrats hold 152 seats against 101 for the Republicans, with 218 needed to secure a majority.

Geopolitical developments and the outlook for interest rates also remain in focus across global financial markets. As diplomatic discussions continue, traders are weighing whether US military strikes against Iran could resume. Washington and Tehran are both examining mediation proposals following reports of US airstrikes on Iran’s Qeshm Island. Lower energy prices could temper expectations that monetary tightening will persist, but the CME FedWatch Tool indicates that markets continue to assign a 79% probability to a Federal Reserve rate hike in December.

Is Democrat-led fiscal restraint helping the Dollar stabilise as markets reassess its impact?

The prospect of Democrat control of Congress had led investors to prepare for “fewer fiscal giveaways and therefore less inflation,” according to Rabobank analysts. That combination, they note, “suggests lower yields on treasuries which have negative implications for the USD.” Yet they say the early market response is already receding as investors reconsider the policy outlook: the “DXY dollar index” has “already started to reverse some of its initial losses”.