Indonesia Rupiah Weakens Following Cabinet Reshuffle, Investor Caution

The Indonesian rupiah has been weakening against the US dollar due to a combination of domestic and global factors. Domestically, the replacement of Finance Minister Sri Mulyani with Purbaya Yudhi Sadewa amid a broader cabinet reshuffle has triggered investor uncertainty and foreign bond sell-offs, contributing to negative market sentiment. Analysts project the rupiah to trade between Rp16,350 and Rp16,550 per US dollar, with some expecting it could weaken further to around Rp16,550. Globally, investor caution ahead of upcoming US inflation data and expectations of Federal Reserve interest rate cuts have led to a stronger US dollar, adding pressure on the rupiah. Additionally, weak US economic data, including disappointing Non-Farm Payroll figures and a rising unemployment rate, have influenced market dynamics, although these have also fueled speculation about potential Fed rate cuts. Domestic concerns are further heightened by warnings from Fitch Ratings about Indonesia's credit profile amid ongoing social-political tensions and economic challenges.