USD/IDR continues its slides for the third consecutive day, trading around 17,760 in Asian session time on Friday. The pair keeps losing value even as the Indonesian Rupiah (IDR) stays firm, defying a pronounced widening of Indonesia’s current‑account deficit.
In Q2 2026 Indonesia recorded a record current‑account shortfall of USD 12.49 billion, roughly 3.3 % of GDP—a jump from USD 2.89 billion the prior year. The surge stems primarily from a dramatic contraction in the trade surplus to USD 1.32 billion (down from USD 10.52 billion in Q2 2025), led by spikes in energy imports triggered by oil price surges amid Middle‑East conflict.
Nevertheless, the Rupiah receives substantial spillover from its deep economic link to China. Optimism grew after Vice Finance Minister Liao Min promised imminent supplemental fiscal measures grounded in emerging trends, underscoring ongoing policy continuity and longer‑term resource allocation.
Domestic monetary policy adds further weight to currency resilience. Bank Indonesia held its benchmark rate steady at 5.75 % for a second straight month during its latest meeting, overseen by acting governor Destry Damayanti after the sudden exit of Perry Warjiyo. Marking a total of 100 basis‑points of cumulative hikes since May, the central bank reiterated that its strategy will protect the Rupiah from imported inflation while leveraging liquidity tools to back broader growth.
Additional downside pressure comes from a softening US Dollar, compounding weakness in the USD/IDR pair. The greenback has fallen alongside subdued Treasury yields as markets respond to Washington’s drive to temper higher long‑end yields via an extended‑end bond purchase programme.
USD buyback move seen as awkward attempt to steady long-end yields
Strategists at Scotiabank argue that the U.S. Treasury’s decisive doubling of bond purchases is a targeted yet relatively modest effort aimed at anchoring longer‑termin rate expectations. The operation, slated to shift financing from USD2 billion to USD4 billion between September 9 and November 4, is framed by officials as a liquidity‑management play. Analysts view the timing and scale as insufficiently supportive of treasury‑market confidence and dubious for stabilising yields.
US Dollar FAQs
The U.S. Dollar serves as both the official currency of the United States and the de‑facto money of numerous other economies, circulating alongside domestic notes globally. It dominates international forex activity, handling more than 88 % of daily turnover—averaging $6.6 trillion per day according to 2022 figures—and retained its status as the world’s reserve currency after World War II, originally pegged to gold until the 1971 Bretton Woods reforms.
The dominant driver of the dollar’s value is Federal Reserve monetary policy, defined by the Fed’s dual mandate of achieving price stability and fostering maximum employment. By adjusting interest rates, the Fed influences the dollar’s attractiveness: higher rates tend to bolster the greenback, whereas lower rates exert downward pressure.
In extreme contexts, the Fed resorts to quantitative easing (QE), injecting additional reserves into the financial system to reignite credit flow when conventional rate cuts prove ineffective. QE generally weakens the dollar because the expanded balance sheet lowers borrowing costs and signals looser financial conditions.
Conversely, quantitative tightening (QT) marks the reversal process, wherein the Fed ceases bond purchases and refrains from reinvesting maturing principal, thereby tightening monetary conditions that typically support a stronger dollar.
