Rupiah Under Pressure as Markets Await Economic Data

Jakartaweekly.com-

The US dollar index strengthened in Wednesday’s (Aug. 26, 2026) trading session as investors focused on developments in the US-Iran conflict and a number of key events involving the US Federal Reserve. Economic, currency and commodity analyst Ibrahim Assuaibi said external factors remained among the main drivers of movements in the foreign exchange market.

One of the key developments drawing market attention was a report by Russian media suggesting that the United States and Iran could be nearing a ceasefire agreement. Russian news agency RIA reported that the two countries were said to be close to reaching a deal, citing sources in Pakistan and Iran.

The reported agreement would reportedly include freedom of navigation through the Strait of Hormuz and could be announced within days. The development is being closely watched by markets given the Strait of Hormuz’s importance as a major route for global energy trade.

The report came after Pakistani officials said progress had been made in mediation talks with Iran. Pakistan previously played a role as a regional mediator in the US-Iran conflict and helped facilitate a temporary ceasefire between the two countries in June.

Amid the geopolitical developments, investors have begun shifting their attention toward the US economic agenda. Personal Consumption Expenditures (PCE) data is among the key indicators being closely watched, as it could provide a clearer picture of the US economy and the direction of inflationary pressures in the world’s largest economy.

Markets are also awaiting a key speech by Warsh at the Jackson Hole symposium on Friday. The speech is being closely watched for potential clues on the Federal Reserve’s policy direction, particularly as policymakers weigh persistent inflation risks against the outlook for economic growth.

Federal Reserve Bank of Boston President Susan Collins previously voiced support for keeping interest rates at their current level. However, that stance remains dependent on inflation continuing to move toward the US central bank’s 2% target.

Ibrahim said Warsh’s remarks at Jackson Hole would be an important factor for markets in assessing the direction of US monetary policy. Investors are seeking greater clarity on when the Fed could begin adjusting its policy should inflationary pressures show signs of changing.

Domestically, market attention is turning to Indonesia’s economic cycle, which is considered to remain below its full potential. Acting Bank Indonesia Governor Destry Damayanti said there was still considerable room to accelerate growth, particularly by optimizing the banking sector’s intermediation function.

One area that could be leveraged is lending. Destry said undisbursed loans—credit facilities that have been approved but not yet drawn by borrowers—stood at around Rp2,548 trillion, or approximately 21% of total credit limits. The figure indicates there is still room to strengthen the transmission of monetary policy to the real sector.

Beyond boosting overall lending, strengthening financing for micro, small and medium-sized enterprises (MSMEs) is also considered important. Improved access to financing for MSMEs is expected to bolster household purchasing power while providing additional support for domestic economic activity.

Destry said maintaining economic stability alone would not be sufficient to address the country’s growth challenges. Bank Indonesia needs a policy mix capable of supporting sustainable growth, which in turn requires stronger and more adaptive institutional capacity.

Domestic market participants will also be watching several economic indicators scheduled for release next week. These include August inflation, July trade performance, the manufacturing Purchasing Managers’ Index (PMI), foreign exchange reserves and the Consumer Confidence Index (CCI). The data will offer clues about the direction of Indonesia’s economy in the second half of the year.

In the foreign exchange market, the rupiah edged down by two points on Wednesday. The currency closed at Rp17,725 per US dollar, after briefly strengthening by seven points to that level, compared with the previous session’s close of Rp17,723 per dollar. For Thursday’s (Aug. 27, 2026) trading session, Ibrahim expects the rupiah to remain volatile with a bias toward further weakening, moving in the range of Rp17,720 to Rp17,760 per US dollar.