Fed’s cautious stance boosts dollar index, dragging rupiah and regional peers lower
The Indonesian rupiah extended its losing streak on Wednesday (24 Sept 2025), weakening alongside most Asian currencies as the US dollar regained strength on the back of cautious signals from the Federal Reserve.
Rupiah and Regional Peers Slide
At 09:15 WIB, the rupiah weakened 0.15% to Rp16,685 per US dollar, marking its fifth consecutive day of decline since 18 September. Bloomberg data showed the rupiah briefly touched Rp16,694, underscoring persistent market pressure. Regionally, the peso fell 0.32% to PHP 57.43 per dollar, while the Thai baht slid 0.25% to THB 31.91. The Japanese yen and Chinese yuan also edged lower, down 0.08% and 0.07% respectively.
Dollar Index Rebounds
The US dollar index (DXY) rose back to 97.33 after a brief two-day dip, reversing its earlier losses. The rebound came after Fed Chair Jerome Powell reiterated the central bank’s cautious approach, stressing the need to balance inflation control with risks of labor market weakness. His remarks reinforced market expectations that aggressive rate cuts are unlikely in the near term.
Market Uncertainty Over Fed Policy
Powell’s comments highlighted ongoing uncertainties over the pace of monetary easing. He warned that moving too quickly could reignite inflation, while delaying cuts risks a sharper economic slowdown. Adding to the mixed signals, Fed Governor Stephen Miran, who previously advocated for a 50 basis point cut, cautioned that excessive caution could deepen the slowdown.
Asian Currencies Under Pressure
The US dollar’s strength weighed across Asia. The Singapore dollar, Taiwan dollar, and Korean won weakened by 0.05–0.09%, while Vietnam’s dong slipped 0.06%. Interestingly, India’s rupee and Taiwan’s dollar briefly bucked the trend, posting gains of 0.05% and 0.04% respectively before turning volatile later in the session.
Investor Focus on Inflation Data
Traders are now awaiting the release of the US Personal Consumption Expenditures (PCE) inflation index, a key gauge for Fed decisions. Expectations that the Fed will hold off on aggressive easing continue to drive dollar demand, limiting upside for Asian currencies.
Broader Implications
The rupiah’s weakness highlights Indonesia’s vulnerability to global monetary shifts. For Southeast Asian economies, the dollar’s rally underscores the delicate balance between maintaining currency stability and responding to domestic economic challenges.
The rupiah’s slide, alongside regional peers, reflects renewed pressure from a stronger dollar fueled by the Fed’s cautious stance. As global markets await fresh US inflation data, Asian currencies are likely to remain volatile, with Indonesia and its neighbors closely watching Fed signals that will shape the region’s economic outlook.
Sources: CNBC Indonesia (2025) , Bisnis.com (2025)
Keywords: Rupiah, US Dollar, Dollar Index, Federal Reserve, Asian Currency Weakness, Jerome Powell
