The Indonesian rupiah closed lower against the US dollar on Thursday, trading near the 18,000 level as investors digested renewed hawkish signals from the Federal Reserve and sustained high global oil prices.
The currency's depreciation reflects broader emerging-market stress as the greenback strengthens on expectations that US interest rates will remain elevated for longer than previously anticipated.
Financial markets have undergone a sharp repricing of Federal Reserve policy expectations, with traders decisively moving away from anticipating near-term interest rate cuts.
Recent inflation data has pushed the probability of early easing lower, reinforcing the dollar's dominance and putting additional strain on currencies with trade deficits, including the rupiah.
The central bank's cautious stance on monetary policy has further complicated the outlook for Indonesian assets.
Bank Indonesia has identified the Federal Reserve's restrictive posture as a key external headwind, alongside the impact of high global energy prices on the country's current account.