Indonesian Rupiah Crumbles Amid Stronger USD and Higher Oil Prices

The Indonesian Rupiah (IDR) has weakened against the US Dollar (USD), trading at around 17,730 during Asian hours on Tuesday. This comes as the USD receives support from rising expectations for a US Federal Reserve interest rate hike this week.

Rising oil prices have intensified inflation concerns in Indonesia, which is a net oil importer. The higher energy costs threaten to strain the country's fiscal balance and fuel domestic inflation.

The FedWatch tool indicates that money markets now reflect over a 92% chance of a rate hike, up from roughly 60% just a week prior. Strategists at Scotiabank report that the USD is entering FOMC week on a firm note, as markets respond to shifting expectations around the policy decision.