Indonesian Rupiah weakens after mixed economic figures

• Export growth of 11.87% year-on-year, up on the previous month, helped lift Indonesia’s September trade surplus to $3.36 billion.
• At 3.23% in October, domestic inflation edged lower and stayed within Bank Indonesia’s target range.
• A 75% probability of a Fed rate rise underpins the dollar, although easing Middle East tensions have capped its gains.

Indonesia’s September trade surplus reached USD 3.36 billion, well above market expectations of USD 1.9 billion, while export growth accelerated to 11.87% year-on-year from 6.72% in August, comfortably exceeding forecasts of 6.45%. Despite these strong headline trade figures, the Indonesian Rupiah (IDR) remained subdued following a mixed set of domestic economic releases. Against that backdrop, USD/IDR recovered after two days of declines, trading at around 18,180 during Monday’s Asian session.

September imports rose 18.41% year-on-year, below the expected 20.83% increase and the slowest pace since March. Diverging energy trends contributed to the slowdown: higher purchases of refined oil products drove a 23.94% year-on-year rise in oil and gas imports, whereas crude oil imports fell by 7.00%. October’s annual domestic inflation rate, meanwhile, eased to 3.23% from September’s three-month high of 3.28%. The reading undershot market expectations of 3.29% and left inflation comfortably inside Bank Indonesia’s 1.5% to 3.5% target range.

Although the Rupiah remains weak, further gains in USD/IDR could be constrained by a declining US Dollar (USD) as demand for safe havens eases. Qatari and Iranian officials held talks for a third consecutive day, seeking to resolve the Middle East conflict before the US midterm elections. The discussions reduced geopolitical tensions, counterbalancing persistent concerns about renewed US military action against Iran.

Rising expectations of a Federal Reserve interest rate increase nevertheless leave scope for the US Dollar to recover. The CME FedWatch Tool shows traders assigning approximately a 75% probability to a December rate rise, supported by recent resilient US macroeconomic readings and continuing inflationary pressures.

Dollar remains under pressure from tech sell-off despite Fed support

The continuing technology sell-off is likely to weigh on the Dollar in the near term, according to Brown Brothers Harriman’s Elias Haddad, with “the USD index (DXY) likely to test support at 101.00.” Yet he emphasises that “strong US economic activity and rising price pressures reinforce the Fed’s hawkish bias, keeping rate differentials supportive of USD,” indicating that underlying fundamentals remain a significant source of support for the currency despite deteriorating risk sentiment.