Record lows for Indonesian Rupiah as MSCI index concerns and political uncertainty weigh

• 18,272 marked a record high for USD/IDR. Concerns over Indonesia’s emerging-market status drove the move.
• Political uncertainty has deepened following Vice President Gibran Rakabuming Raka’s resignation, putting the ruling coalition at risk of a split.
• Stronger-than-expected US inflation figures have reinforced a hawkish Federal Reserve policy outlook, lending support to the US Dollar.

18,272 is the fresh record high for USD/IDR. Renewed worries about Indonesia’s emerging-market status pushed the pair to that level. After gapping higher at the open, it continues to advance, trading around 18,260 during Thursday’s Asian session. The latest decline in the Rupiah came after MSCI removed a local firm from its indexes. This dealt another blow following last month’s warning from the index provider that unresolved investability issues could result in Indonesia’s reclassification as a standalone market.

The resignation of Vice President Gibran Rakabuming Raka has also deepened political uncertainty. His exit threatens to divide the ruling coalition in Southeast Asia’s largest economy. Such a split could hinder policymaking for an administration already under scrutiny over its wider economic management and flagship measures, including the free school meals programme.

Further support for USD/IDR comes from US Dollar (USD) strength. Higher-than-forecast US Consumer Price Index (CPI) inflation figures have prompted an increasingly hawkish outlook for Federal Reserve (Fed) policy.

A December rate rise has attracted stronger trader bets, particularly since Fed Governor Christopher Waller said earlier this week that he would support a quarter-point increase, or even a half-point move should inflation deteriorate. Markets now assign around an 87% probability to a December rate hike, according to the CME FedWatch Tool, with a nearly 13% chance of a larger 50 basis point increase.

Technical Analysis: 66.99 RSI Puts USD/IDR Close to Overbought Territory

At 18,260 on the daily chart, USD/IDR continues to gain above its short- and medium-term trend indicators. Both the nine- and 50-period Exponential Moving Averages (EMAs) remain below the price, indicating that the uptrend retains solid support following the latest breakout. A reading of 66.99 places the 14-day Relative Strength Index (RSI) close to overbought territory. This points to robust bullish momentum, although it also increases the likelihood of a near-term pause rather than an immediate reversal.

Should selling pressure develop, the nine-period EMA near 18,147.87 provides the first support, followed by the 50-period EMA around 18,010.74 as a deeper buffer. The short-term outlook stays positive while USD/IDR remains above these moving averages. Pullbacks towards the EMA cluster are therefore likely to draw renewed buying interest.

8/10 Speechtracker Score: Goolsbee’s Inflation Warning Adds to Hawkish Fed Tone

An FXS Speechtracker score of 8/10, against an established baseline of 6.8/10, marked a distinctly more hawkish message from Fed’s Goolsbee and highlighted growing concern over inflation dynamics. He characterised the latest CPI as “borderline disturbing” and stressed that services inflation is “not coming down,” presenting inflation as a “real issue” with both cost- and demand-side drivers. His remarks clearly warned of overheating prices and the danger that expectations could become unanchored. With “everything is always on the table” and inflation needing to return to target, the message reinforces the likelihood of policy leaning towards tighter conditions, despite his description of the labour market as steady and stable.

A gain of 1.69 points took the FXS Fed Sentiment Index to 145.61, well inside hawkish territory and in line with the high FXS Speechtracker score. Within the FXS Fed Sentiment Index metrics, the increase indicates that Goolsbee’s comments significantly reinforced perceptions of a hawkish bias in the Federal Reserve’s policy narrative.

(The technical analysis of this story was written with the help of an AI tool. Know more.)