Slowing domestic growth keeps Indonesian Rupiah under pressure

• Lower 2026 GDP forecasts, elevated oil prices and growing imports undermine fiscal sentiment, leaving the Indonesian Rupiah weaker.
• To keep currency intervention active while containing costs, Bank Indonesia is making greater use of Non-Deliverable Forwards (NDFs).
• Further losses in USD/IDR are cushioned by widespread US Dollar weakness after Democratic victories in the midterm elections.

At around 18,200 in Wednesday’s Asian session, USD/IDR is extending its advance into a third consecutive day. Growing domestic concerns continue to weigh on the Indonesian Rupiah (IDR), pushing the pair higher.

Indonesia’s 2026 growth forecast has been cut to 5.4%–5.5% from 5.6%–6% by Finance Minister Suahasil Nazara ahead of Thursday’s Q3 GDP release. The revision signals a further slowdown from Q2’s 5.29% year-on-year growth. High oil prices, increasing import volumes and fluctuating export revenues are compounding the fiscal and external pressures.

Describing its currency interventions as effective, Bank Indonesia (BI) reiterated its commitment to remaining active in the market. Governor Destry reaffirmed that the central bank would rely more heavily on Non-Deliverable Forwards (NDFs) to reduce the costs of direct intervention in the spot market.

Nevertheless, broad US Dollar weakness in the wake of Tuesday’s midterm elections is limiting further upside in USD/IDR. Democrats have taken control of the US House of Representatives from the Republicans, prompting market participants to anticipate possible changes in congressional leadership and fresh uncertainty about the future direction of US fiscal policy. Live figures from Decision Desk HQ show that 253 of the 435 House seats have been called. Democrats hold 152 seats against the Republicans’ 101, with 218 needed for a majority.

Geopolitical developments and the outlook for interest rates also remain in focus across global financial markets. As diplomatic discussions continue to drag on, traders are assessing whether US military strikes against Iran could resume. Both Washington and Tehran are considering mediation proposals following reports of US airstrikes on Iran’s Qeshm Island. Although lower energy prices could temper expectations of an extended period of monetary tightening, markets continue to assign a 79% probability to a Federal Reserve rate hike in December, according to the CME FedWatch Tool.

Dollar stabilises as investors reconsider Democrat-led fiscal restraint

Investors had prepared for the prospect of Democrat control of Congress bringing “fewer fiscal giveaways and therefore less inflation,” according to analysts at Rabobank. That combination, they note, “suggests lower yields on treasuries which have negative implications for the USD.” Yet the analysts say the early market response is already losing momentum as investors reconsider the policy outlook: the “DXY dollar index” has “already started to reverse some of its initial losses”.