June retail sales in Indonesia fell 3.0% year-over-year, pressuring the Rupiah as USD demand strengthens amid Fed rate hike expectations.
The USD/IDR pair climbed to around 17,850 in Asian trading Tuesday, reversing two days of losses. The Indonesian Rupiah weakened after June retail sales declined 3.0% year-over-year, a modest improvement from May’s 3.9% drop but still the second consecutive monthly contraction.
Government support earlier in the year helped soften the blow to household spending, though consumer demand remains subdued. The US Dollar’s rebound, driven by rising Treasury yields and geopolitical tensions, further weighed on the Rupiah.
Markets are now pricing in a 51% chance of a 25-basis-point Fed rate hike in September, up from 44.4% a day earlier. Investors await upcoming US inflation data to assess the Fed’s next move, while concerns over stagflation risks persist.