15.07.202605:32:06UTC+00Rupiah Slips as Rising Oil Prices Raise Import Bill Concerns

The Indonesian rupiah weakened to around IDR 18,080 per U.S. dollar on Wednesday, retreating after briefly strengthening below IDR 18,000 in the previous session. The currency came under pressure as continued gains in crude oil prices reignited worries over Indonesia’s energy import bill, given its status as a net oil importer.

Market participants also adopted a cautious stance ahead of Bank Indonesia’s policy meeting next week, following the central bank’s cumulative 100 bps rate hikes between May and June to shore up the rupiah. Policymakers are expected to maintain a vigilant tone, with foreign exchange reserves hovering near a two-year low despite a modest increase in June.

At the same time, concerns about softer domestic activity in the second quarter have intensified amid weak manufacturing performance and slower consumer spending, partly due to higher prices for non-subsidized fuels.

Still, the rupiah’s losses were limited as the U.S. dollar index extended its decline after softer U.S. inflation data tempered expectations of a near-term Federal Reserve rate hike. Additional support came from S&P’s decision to affirm Indonesia’s investment-grade sovereign rating.