How is stronger-than-expected Q3 GDP lifting the Indonesian Rupiah?

• Indonesia outpaced market growth forecasts of 5.2%, with GDP expanding 5.47% year-on-year in Q3 2026.
• The Greenback faced substantial selling pressure as Democrats swept the US elections and oil prices declined.
• Broader US dollar declines were contained by robust US ADP employment figures and 82% odds of a Fed rate hike.

The Indonesian Rupiah (IDR) retains its gains against the US Dollar (USD), keeping USD/IDR under pressure for a second consecutive day near 18,110 during Thursday’s Asian session. The currency’s strength follows the publication of    third-quarter Gross Domestic Product (GDP) figures.

At 5.47% year-on-year, Indonesia’s GDP growth in the third quarter of 2026 exceeded the market projection of 5.2%. Growth picked up sharply from Q2’s 5.29%, which had been the lowest reading in three quarters. Quarter-on-quarter expansion stood at 1.59%, comfortably above the consensus forecast of 1.3%, despite slowing markedly from the previous quarter’s 3.73% surge.

A weaker Greenback following the Democratic sweep of the US midterm elections weighed on USD/IDR. Investors became increasingly concerned about political gridlock in Washington after Democrats secured both houses of Congress. Oil prices also fell sharply on expectations that the Middle East conflict would be resolved swiftly, adding to the pressure on the US dollar.

Resilient domestic economic indicators could, however, provide underlying support for the US dollar (USD) by strengthening expectations of additional monetary tightening by the Federal Reserve. According to ADP, US private-sector employers added 86,000 jobs in October, exceeding the 69,000 forecast despite a small downward revision to September’s reading. At 54.5, the ISM Services PMI was marginally below expectations, but continued to indicate steady growth in the services sector.

Expectations of tighter US monetary policy remain firmly entrenched in financial markets. The CME FedWatch Tool puts the probability of a December Fed rate hike at nearly 82%. For fresh direction, investors are focusing on forthcoming US labour market releases, with weekly initial jobless claims due on Thursday and the nonfarm payrolls report on Friday.

Does the dollar’s move towards the middle of its smile signal a relief rally?

Rather than signalling the beginning of a more disorderly decline, the recent weakness in the G10 Dollar represents “something of a ‘relief rally’”, according to Scotiabank analysts. In their assessment, market movements indicate “a shift in the USD toward the middle of its ‘smile’, in which relative growth and interest rate differentials narrow as the US/USD drift from the edge linked to exceptionalism – with the other edge of the smile tied to sentiment-driven risk aversion.”