Jakarta. The rupiah weakened against the dollar on Thursday, as investors grew cautious amid political gridlock in Washington and expectations of an imminent Federal Reserve rate cut.

According to Bloomberg data, the rupiah depreciated by 44 points, or 0.27 percent, to Rp 16,629 per US dollar by late afternoon trading. Meanwhile, the US dollar index edged up 0.11 percent to 99.01.

Ibrahim Assuaibi, director at Traze Andalan Futures, said the rupiah came under pressure as the US government shutdown entered its 22nd day on Wednesday, the second longest in history, with negotiations between the White House and Congress still deadlocked over the federal budget.

“Markets now see a 25-basis-point rate cut by the Federal Reserve as almost certain at its upcoming October 29–30 policy meeting, although upcoming inflation data could still influence expectations for future policy direction,” Ibrahim said on Thursday.

He said a Fed rate cut would have a significant impact on the rupiah’s movement in the coming weeks. Investors are also awaiting the release of US Consumer Price Index (CPI) data and preliminary October readings of the S&P Global Purchasing Managers’ Index (PMI).

The rupiah’s decline also followed geopolitical developments after the US warned it was prepared to take further action following its renewed push for Moscow to agree to a ceasefire in Ukraine.

Adding to pressure, the Trump administration is reportedly considering restrictions on software-related exports to China, raising concerns of renewed trade tensions between the world’s two largest economies.

Domestically, the rupiah’s weakness was compounded by market concerns over continued capital outflows. Bank Indonesia recently acknowledged that it has been relying heavily on foreign exchange reserves to stabilize the currency amid persistent selling pressure from foreign investors.

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