Indonesian Rupiah weakens as Fed hike bets lift US Dollar
USD/IDR rises for the second successive day, trading around 18,040 during the Asian hours on Monday. The pair appreciates as the US Dollar receives support from prevailing market expectations of Federal Reserve (Fed) interest rate hikes later this year. The CME FedWatch tool shows financial markets are pricing in a 77.3% chance of Federal Reserve (Fed) interest rate hikes by year-end.
Traders will likely observe the US Institute for Supply Management’s (ISM) Services Purchasing Managers’ Index (PMI) due later in the day. Traders will shift their focus toward Wednesday's release of the Fed’s June policy Meeting Minutes to gain clearer insights into the future path of interest rates.
However, the US Dollar may face headwinds after last week’s dismal labor data prompted markets to scale back expectations for a September rate hike. US Nonfarm Payrolls (NFP) grew by a meager 57,000 last month, severely undershooting the forecasted 110,000. Although the headline unemployment rate ticked down unexpectedly to 4.2% (from May’s 4.3%), the sharp deceleration in hiring underscores a broader economic cooldown.
Meanwhile, attention shifts to Indonesia’s June foreign exchange reserves release due on Wednesday. In May, reserves hit a near two-year low after falling for a fifth consecutive month due to heavy central bank intervention to defend the rupiah. The continuous drawdown has raised red flags, with Fitch Ratings recently warning of potential risks to the country's credit profile.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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