• USD/IDR falls as the Indonesian Rupiah finds support ahead of Thursday's Bank Indonesia policy decision.
• Traders expect the BI to hike interest rates by 25 basis points to 5.75%.
• US Dollar declines amid easing safe-haven demand following a preliminary US-Iran MoU to end the war.

USD/IDR inches lower after opening at a bullish gap, remaining in the positive territory and trading around 17,880 during the Asian hours on Thursday. The currency pair breaks lower as the Indonesian Rupiah (IDR) finds support ahead of Bank Indonesia’s (BI) policy meeting on Thursday.

Traders are actively pricing in the possibility of a 25-basis-point interest rate hike to 5.75%, building on momentum from last week when BI delivered a surprise 25-basis-point increase. That unexpected move was aimed squarely at defending the Rupiah and taming accelerating inflationary pressures, as the country's annual inflation rate jumped to 3.08% in May from 2.42% in April, closing in on the upper limit of the central bank's 1.5% to 3.5% target range.

The USD/IDR pair holds losses as the US Dollar (USD) slips on easing safe-haven demand following the BBC report late Wednesday, indicating that the White House confirmed that US President Donald Trump and Iranian President Masoud Pezeshkian signed a preliminary memorandum of understanding designed to end the US-Israel war on Iran. This decisive executive action follows the electronic signing of the initial framework by US Vice President JD Vance and Iranian Parliamentary Speaker Mohammad Bagher Ghalibaf earlier in the week.

However, the US Dollar could rebound on rising odds of rate hikes by the Federal Reserve (Fed) later this year. The Fed’s June Summary of Economic Projections showed half of FOMC members expect at least one rate hike this year. Despite economic disruptions linked to the conflict in Iran, resilient labor market data and persistent underlying inflation measures continue to drive tightening pressures.