Bank Indonesia holds rates steady but warns of potential tightening if US Treasury yields pressure the rupiah further.
The Indonesian rupiah declined against the US dollar, with USD/IDR trading near 17,740 in Asian hours, reversing three days of losses. The pair faces pressure despite Bank Indonesia’s 100-basis-point rate hikes in May and June to defend the currency.
Bank Indonesia paused its tightening cycle but emphasized rupiah stability amid rising US Treasury yields and Middle East volatility. Acting Governor Destry Damayanti signaled readiness for further hikes if external pressures intensify. Meanwhile, the US dollar weakens after Treasury pledged to double buybacks of longer-dated debt, potentially exceeding $4 billion.
Commerzbank’s Moses Lim noted the central bank’s focus on stability, though risks remain fluid. Markets await further cues on US fiscal measures and global yield trends.