Indonesian Rupiah remains under pressure as domestic growth slows

USD/IDR remains stronger for the third consecutive day, trading around 18,200 during European hours on Wednesday. The currency pair is moving higher as the Indonesian Rupiah (IDR) struggles under the weight of mounting domestic concerns.

Ahead of the Q3 GDP data release on Thursday, Finance Minister Suahasil Nazara lowered the nation's 2026 growth projection to 5.4%–5.5%, down from 5.6%–6%, signaling a further slowdown from the 5.29% year-on-year growth recorded in Q2. Adding to these fiscal and external pressures are elevated oil prices, rising import volumes, and volatile export revenues.

Bank Indonesia (BI) maintained that its currency interventions have proven effective, with Governor Destry reaffirming the central bank's commitment to an active market presence through a greater reliance on Non-Deliverable Forwards (NDFs) to lower the costs associated with direct spot interventions.

However, further gains in the USD/IDR pair remain constrained by broad weakness in the US Dollar following Tuesday's midterm elections. With Democrats winning control of the US House of Representatives from the Republicans, market participants are anticipating potential shifts in congressional leadership and renewed uncertainty over future US fiscal policy. According to live data from Decision Desk HQ, results have been called in 253 of the 435 House seats, with Democrats holding 152 seats compared to the Republicans' 101 in the pursuit of the 218 required for a majority.

Meanwhile, global financial markets are closely tracking geopolitical developments and interest rate expectations. Traders are evaluating the potential resumption of US military strikes against Iran as diplomatic talks drag on, with both Washington and Tehran reviewing mediation proposals following reported US airstrikes on Iran’s Qeshm Island. While softer energy prices could ease expectations for prolonged monetary tightening, data from the CME FedWatch Tool shows markets are still pricing in a 79% probability of a Federal Reserve rate hike in December.

Dollar steadies as markets reassess impact of Democrat-led fiscal restraint

Analysts at Rabobank note that investors had been braced for the possibility that Democrat control of Congress would mean “fewer fiscal giveaways and therefore less inflation,” a combination that “suggests lower yields on treasuries which have negative implications for the USD.” However, they point out that the initial reaction has already begun to fade, with the “DXY dollar index” having “already started to reverse some of its initial losses” as markets reassess the policy outlook.