Indonesian Rupiah Weakens Against US Dollar Amid Fed Rate Hike Speculation

The Indonesian Rupiah opened lower against the US Dollar by 25 points or 0.14% to 17,783 per US dollar on Monday, September 21, 2026. This marks a decline from the previous closing level of 17,758 per US dollar. The pressure on the Rupiah is attributed to rising US Treasury yields, driven by expectations of further interest rate hikes by the US Federal Reserve (Fed). Analysts predict that the Rupiah could continue to weaken against the US Dollar in the near term, as these rate hike prospects put pressure on Bank Indonesia (BI) ahead of its upcoming Board of Governors Meeting (RDG) on September 23, 2026. The Federal Open Market Committee (FOMC) previously decided to raise the federal funds rate to a range of 3.75% to 4.0% on Wednesday, September 16, 2026. This was the first rate hike by the US central bank since July 2023. The Fed has two more scheduled meetings this year, one at the end of October 2026 and another in early December 2026. Updated economic projections from FOMC participants indicate that a majority of Fed officials expect policy rates to rise to the 4% to 4.25% range by the end of 2026. These projections for Fed rate hikes have kept US 10-year Treasury yields around 5%, while the 2-year yield has climbed to 4.756%, its highest level since 2024. Bank Indonesia is expected to hold its policy rate steady at its upcoming Monetary Policy Meeting (RDG) scheduled for September 22-23, 2026. Based on these sentiments, the Rupiah is predicted to trade within the range of 17,700 to 17,850 per US dollar. Previously, the Rupiah closed weaker against the US Dollar on Friday, September 18, 2026, falling 5 points or 0.03% to 17,758 per US dollar, from 17,753 per US dollar in the prior trading session. In contrast, the Jakarta Interbank Spot Dollar Rate (JISDOR) set by Bank Indonesia actually strengthened, recorded at 17,745 per US dollar, up from the previous position of 17,753 per US dollar. Analysts note that the Rupiah's movement continues to be influenced by several external sentiments, including the risk of sustained high oil prices. The strengthening of government bonds is overshadowed by the risk of oil prices remaining above the state budget assumptions. Brent crude for November delivery fell 1.3% to US$103.40 per barrel amid hopes for alternative oil supply routes from West Asia to the global market, though geopolitical uncertainties remain a concern for investors.