Indonesian Rupiah steadies as traders weigh BI’s decision of holding rates

USD/IDR moves little after posting minor gains in the previous day, trading around 17,960 during the Asian hours on Thursday. The pair steadies as the Indonesian Rupiah (IDR) strengthens following Bank Indonesia's (BI) surprise decision to hold benchmark rates at 5.75%. Rather than raising borrowing costs, Governor Perry Warjiyo introduced targeted measures to attract foreign inflows and stabilize the currency.

Additionally, the USD/IDR pair holds ground as a weakening US economy outweighs energy-driven inflation fears, keeping the US dollar (USD) under pressure. While markets broadly expect the Federal Reserve (Fed) to leave interest rates unchanged at its upcoming meeting, shifting policy expectations and unclear guidance from new Fed Chair Kevin Warsh have added an extra layer of uncertainty to the Dollar's long-term outlook.

However, the downside of the US Dollar could be restrained due to the safe-haven demand as Middle East tensions remained in focus. Tensions escalated sharply after US President Donald Trump threatened to strike Iranian infrastructure if Tehran targets ships transiting the Strait of Hormuz, prompting Iran to vow swift retaliation against US-linked energy assets across the region.

Iran-backed Houthi militants launched missile and drone attacks on two Saudi oil tankers in the Red Sea. The assault marks the first direct strikes on tankers in the waterway, endangering a vital alternative export route for Saudi crude and opening a dangerous new front in the conflict.