Indonesian Rupiah: Higher oil prices add to IDR pressure - MUFG

MUFG‘s Lloyd Chan remains cautious on the Indonesian Rupiah as domestic inflation accelerates and Gross Domestic Product (GDP) growth stays above 5%. The trade balance has improved slightly but remains weaker than 2025 averages due to higher Oil and gas imports. While Bank Indonesia’s (BI) policy support and intervention framework offer near-term backing, sustained Brent prices above $90 could pressure Indonesias fiscal and external positions and weigh on IDR.

Rupiah support tested by Oil prices

“Meanwhile, we remain cautious on the rupiah. August CPI inflation accelerated to 3.19%yoy and with GDP growth continuing to exceed 5%, inflation risks remain skewed to the upside.”

“July's trade balance returned to a modest surplus of $0.12bn after two months of deficits, largely due to a narrowing in the oil and gas trade deficit to $2.9bn from $3.5bn previously.”

“Nonetheless, the trade balance remains substantially below 2025 averages, highlighting the ongoing drag from higher oil and gas imports.”

“Bank Indonesia's policy support and intervention framework should continue to provide near-term support for the rupiah, but sustained Brent prices above $90/bbl would place increasing pressure on both Indonesia's fiscal and external balances.”