Indonesian Rupiah gains support on positive GDP outlook, record reserves

USD/IDR depreciates after two days of gains, trading around 17,670 during European hours on Tuesday. The pair loses ground as the Indonesian Rupiah (IDR) is drawing support from positive economic sentiment following reassuring remarks from Finance Minister Purbaya Yudhi Sadewa. The minister expressed confidence that Indonesia's GDP growth will remain solid throughout the third and fourth quarters despite the impact of recent natural disasters, emphasizing that the state budget faces no significant fiscal risks.

Further underpinning the IDR's strength are robust external financial buffers. Indonesia's foreign exchange reserves reached a five-month high in August, providing additional stability and boosting investor confidence in the nation's macroeconomic outlook.

However, the downside of the USD/IDR pair could be restrained as the US Dollar (USD) trades in positive territory after recovering its daily losses. Traders price in a greater than 60% probability of a Federal Reserve rate hike in September, bolstered by a stronger-than-expected August US labor report.

US Nonfarm Payrolls expanded by 162,000 while the Unemployment Rate held steady. Investors are now awaiting the upcoming US Producer Price Index and Consumer Price Index reports later this week to gauge the Fed's next policy move.

Fed hike seen as imminent after strong US jobs data

Strategists at BNY Markets say the latest labour data have reinforced their conviction that further policy tightening is close at hand. They note that, “after an exceptionally strong jobs print on Friday, even Governor Christopher Waller’s somewhat equivocal comments on Thursday don’t seem to be enough to change our view that a rate hike is imminent.”