The USD/IDR exchange rate remained in a tight range this week as investors waited for the upcoming Bank of Indonesia (BoI) interest rate decision and the Jackson Hole Symposium in Wyoming. It was trading at 16,230, higher than this week’s low of 16,100.
Bank of Indonesia central bank decision
The USD/IDR exchange rate will be in the spotlight as Indonesia’s central bank delivers its interest rate decision on Wednesday.
Economists expect the bank to leave interest rates unchanged at 5.25% as it observes the trends on inflation and trade after the US and Indonesia reached their trade deals in which goods from the country will be charged a 18% tariff.
These tariffs will have a major impact as the US is one of Indonesia’s top markets. Total trade volume was estimated at $43 billion in 2024, with the US exporting goods worth $10.2 billion and importing $28.1 billion. The trade deficit, which is the only number that Donald Trump looks at, rose to $18 billion.
The central bank has been cutting interest rates in the past few months, bringing them from the post-pandemic high of 6.25% to 5.25% today.
The recent economic data showed that Indonesia’s inflation rose to 2.37% in June from 1.87% in the previous month. It has been in an uptrend after bottoming at -0.09% earlier this year.
The USD/IDR exchange rate will also react to the upcoming Federal Reserve minutes of the last meeting. These minutes normally provide color and more information about the last meeting and hints on what to expect later during the year.
The minutes will come a few days before Jerome Powell takes the stage at the Jackson Hole Symposium in Wyoming. His speech to central bankers and other officials will provide more information on what to expect later in September.
Analysts expect the bank to start cutting interest rates in this meeting as it focuses on the deteriorating labor market now that recent data showed that hiring had stalled. The report showed that the economy created over 73k jobs in July, a figure that will likely be revised downwards.
USD/IDR technical analysis
USDIDR chart | Source: TradingView
The daily chart shows that the USD/IDR exchange rate has been in a downward trajectory after peaking at 16,970 in April this year. It crashed as the US dollar index plunged, losing it lost safe-haven appeal.
The pair crossed the key support at 16,168 briefly and then rebounded. This was an important support as it coincided with the lowest level in July and May.
The USD to IDR pair remained below the 50-day Exponential Moving Average (EMA). Therefore, the pair will likely continue falling as sellers target the next key support level at 16,000. A move above the 50-day moving average at 16,484 will invalidate the bearish outlook.
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