US Dollar Strengthens After Bank Indonesia Cuts Interest Rates, Rupiah Closes Lower

JAKARTA, Investortrust.id – The US dollar strengthened in the foreign exchange spot market following decision by Bank Indonesia, the country central bank, to lower its benchmark interest rate by 25 basis points  to 5.75%. The announcement came after the central bank's Board of Governors Meeting, leading the Indonesian rupiah to close 46 points lower at Rp 16,311 per US dollar on Wednesday, January 15, 2025, according to BI’s Jakarta Interbank Spot Dollar Rate (Jisdor).

The rupiah also weakened on Yahoo Finance’s index, sliding 56 points to Rp 16,315 per US dollar. During the previous trading session, Yahoo Finance recorded the rupiah at around Rp 16,259 per US dollar.

The central bank meeting in January 14–15, 2025 concluded with a decision to reduce the benchmark interest rate by 25 bps to 5.75%. The announcement was made by BI Governor Perry Warjiyo during a press conference at BI’s headquarters in Jakarta on Wednesday.

“Based on a comprehensive assessment and projections for both global and domestic economies, the Board of Governors has decided to lower the BI Rate by 25 bps to 5.75%,” Warjiyo stated.

In addition to the benchmark rate, the RDG also lowered the deposit facility rate by 25 bps to 5% and the lending facility rate by 25 bps to 6.75%.

While the rate cut raised concerns about the rupiah’s stability, Senior Economist and Head of Macroeconomic & Financial Market Research at PT Bank Permata Tbk, Faisal Rachman, provided a broader perspective. He noted that the rupiah’s weakness in January 2025 is largely a global phenomenon, as the US dollar has strengthened against most currencies worldwide.

“Pressure on the rupiah remains due to persistent global uncertainties,” Rachman explained. However, he emphasized that the pressures are gradually becoming more measurable and manageable, even as risks to economic growth intensify.

“Economic growth in 2025 is likely to face challenges, both from domestic and international factors,” he added.

Globally, market attention is centered on the US Consumer Price Index (CPI) report, scheduled for release on Wednesday. Traders are closely watching this data, along with other economic indicators, to assess the Federal Reserve’s cautious stance on interest rates.

“Markets now anticipate only one rate cut this year, a sharp adjustment from earlier expectations of four cuts before December’s Fed meeting,” said Ibrahim Assuaibi, director of PT Laba Forexindo Berjangka, in a written statement.

Attention has also shifted to the incoming policies of President-elect Donald Trump, who is set to begin his second term next week. Analysts expect his administration to boost economic growth and inflationary pressures, with potential tariff hikes and fewer Fed rate cuts bolstering treasury yields and supporting the dollar.

Meanwhile, investors are awaiting key data from China later this week, including the country’s 2024 GDP figures, industrial production data for December, and retail sales numbers—all set to be released on Friday. These indicators will offer insights into the world’s second-largest economy as it closed 2024.