Indonesian Rupiah declines despite weaker US Dollar

USD/IDR extends its gains for the second successive day, trading around 17,790 during the European hours on Monday. However, the upward momentum for USD/IDR remains capped by broader US Dollar (USD) weakness.

The Greenback came under pressure after Goldman Sachs chief economist Jan Hatzius reiterated his forecast that the Federal Reserve will hold interest rates steady in September. Hatzius noted that while Federal Reserve Chair Kevin Warsh delivered hawkish remarks at the Jackson Hole symposium, those words are unlikely to trigger an immediate rate hike unless August CPI and PPI reports show an unexpected spike in inflation—a scenario Goldman Sachs views as unlikely.

During the Jackson Hole address, Fed Chair Warsh maintained a cautious stance on monetary policy, stressing that central bankers still have work to do to ensure cost-of-living pressures subside for Americans. He emphasized that the Fed needs clear evidence of underlying inflation moving quickly toward its target before declaring victory, leaving the door open for potential policy tightening if future inflation data fails to cool as expected.

Goolsbee flags persistent inflation but stays comfortable with steady rates

Fed’s Goolsbee delivers a moderately hawkish tone, with an FXS Speechtracker score of 6.2/10, only slightly above the historical average of 6.1/10, underscoring continuity rather than a major shift. Agreement that inflation is the main issue, acknowledgement that demand-driven price pressures are hard to tackle, and the admission that inflation has lasted longer than expected all reinforce concern, yet the comfort with holding rates steady at the July FOMC tempers the hawkish edge and suggests a preference for maintaining current Dollar policy settings. The lack of strong views on the number of FOMC meetings and the comment that the Fed and Treasury are not at cross purposes further support a steady, institutionally aligned stance rather than an aggressive policy pivot.

The FXS Fed Sentiment Index slipped by 0.41 points to 129.29, indicating a modest pullback in perceived hawkishness despite remaining well above the neutral 100 mark. This keeps the Fed firmly in hawkish territory according to the FXS Fed Sentiment Index, but the slight decline signals that, relative to the established baseline, Goolsbee’s remarks lean more toward validating current policy than escalating Dollar-tightening expectations.

Indonesian parliament approved Destry Damayanti as Bank Indonesia's new governor for the 2026–2031 term. Damayanti replaces Perry Warjiyo, who stepped down in July. Upon taking leadership, she pledged that while Bank Indonesia will coordinate closely with the government to prioritize both growth and stability, this collaboration will not compromise the central bank's independence. Market focus in Indonesia is now turning to upcoming domestic economic indicators set for release this week, specifically the August inflation figures and July trade data.

Technical Analysis:

In the daily chart, USD/IDR trades at 17,790, extending its retreat below both the short-term and medium-term trend markers, which keeps the near-term bias bearish. The pair holds under the nine-period and 50-period Exponential Moving Averages (EMAs), suggesting rallies are likely to be capped by these overhead levels. Momentum remains subdued, with the 14-period Relative Strength Index (RSI) hovering near 42, hinting at persistent downside pressure rather than a decisive reversal.

On the topside, initial resistance aligns with the nine-period EMA at 17,800, with a subsequent barrier at the 50-period EMA near 17,865, where a denser supply zone could emerge if price attempts a corrective bounce. With no clearly defined nearby support levels from the provided indicators, traders may look to recent swing lows and psychological round numbers below 17,800 as potential demand areas, while the prevailing structure favors selling into strength toward the highlighted moving average resistances.

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