Slower domestic growth keeps Indonesian Rupiah under pressure

• 2026 GDP forecast cuts weigh on the Indonesian Rupiah. High oil prices and growing imports add to pressure on fiscal sentiment.
• To sustain active currency intervention more efficiently, Bank Indonesia is making greater use of Non-Deliverable Forwards (NDFs).
• Following Democratic midterm victories, a broadly weaker US Dollar helps contain further declines in USD/IDR.

18,200 is the approximate level for USD/IDR in Wednesday’s Asian session. The pair is firmer for a third consecutive day as growing domestic concerns put pressure on the Indonesian Rupiah (IDR).

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 expansion. High oil prices, increasing import volumes and unstable export revenues are compounding fiscal and external pressures.

Greater use of Non-Deliverable Forwards (NDFs) will help reduce the costs of direct spot intervention, Governor Destry said, reaffirming Bank Indonesia’s (BI) commitment to remaining active in the market. The central bank maintained that its currency interventions had been effective.

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

Geopolitics and the interest rate outlook also remain in focus across global financial markets. As diplomatic discussions continue, traders are assessing whether US military strikes against Iran could resume. Washington and Tehran are reviewing mediation proposals after reported US airstrikes on Iran’s Qeshm Island. Lower energy prices could temper expectations of an extended period of monetary tightening. Even so, the CME FedWatch Tool indicates that markets still assign a 79% probability to a Federal Reserve rate hike in December.

Dollar stabilises as Democrat-led fiscal restraint is reassessed

The initial market response to possible Democrat control of Congress is already fading, according to Rabobank analysts. Investors had prepared for “fewer fiscal giveaways and therefore less inflation,” a combination that “suggests lower yields on treasuries which have negative implications for the USD.” As the policy outlook is reassessed, the analysts note that the “DXY dollar index” has “already started to reverse some of its initial losses”.