Jakarta - The Indonesian rupiah closed lower against the US dollar on Tuesday, falling by 47 points or 0.30% to Rp15,770 per dollar, down from Rp15,724. This decline follows a decrease in market expectations for aggressive cuts to the US Federal Reserve's Funds Rate (FFR).
Market analysts noted that recent US economic data surpassed forecasts, leading to heightened expectations of a robust economy and consequently dampening predictions for significant rate cuts by the Fed in 2025. Current projections suggest a reduction of only 75 basis points for next year, compared to the Fed's earlier estimate of 100 basis points during the September meeting.
Additionally, the rupiah's depreciation was influenced by rising political uncertainty in Japan, following the recent election results which indicated that the ruling party lost its majority in the Japanese Parliament. This situation raises questions about the future formation of the government.
The Jakarta Interbank Spot Dollar Rate (JISDOR) also reflected this trend, dropping to Rp15,760 from Rp15,729 per dollar.
In broader Asian markets, the rupiah's decline was part of a larger trend, with most regional currencies also weakening. The US dollar index strengthened by 0.02% to 104.29.
Market sentiment is further complicated by the upcoming US elections on November 5, where candidates Donald Trump and Kamala Harris are expected to face a tight race, contributing to ongoing uncertainty.
Looking ahead, traders are awaiting key economic data releases, including the third quarter GDP figures and inflation metrics, which could influence future monetary policy decisions.