Jakarta. The Indonesian rupiah strengthened against the US dollar on Tuesday, following weaker-than-expected economic data from the United States. The currency gained 18.5 points, closing at Rp 15,187 per US dollar in interbank trading in Jakarta.

The improvement comes after the release of the US S&P Global Composite PMI for September 2024, which dropped to 54.4, slightly down from 54.6 in August but still higher than market expectations of 54.3.

"The growth was mainly driven by the services sector, while the contraction in manufacturing deepened," said Josua Pardede, Chief Economist at Bank Permata, said on Tuesday.

The S&P Global Services PMI dropped to 55.4 from 55.7, while the Manufacturing PMI fell further to 47.0 from 47.9.

Market participants are now closely watching the US Federal Reserve's next steps. Expectations of a 50-basis-point rate cut by the Fed in November have diminished following the release of the PMI data. Investors are also anticipating the Personal Consumption Expenditures (PCE) inflation report and comments from Federal Reserve officials, which may offer clues about future monetary policy.

Indonesian Rupiah Drops Amid Fed Easing Cycle Expectations

Meanwhile, China’s market saw a boost as the government rolled out new stimulus measures, including lower mortgage rates and reduced reserve requirements for banks. These steps raised hopes of a recovery in Asia's largest economy, which could positively impact the broader region, according to Ibrahim Assuaibi, a foreign exchange analyst at Laba Forexindo Berjangka.

On the domestic front, Indonesia’s government expects stable economic growth in the third quarter of 2024. With both the US Fed and Bank Indonesia cutting rates—BI by 25 basis points ahead of the Fed's potential 50-basis-point reduction—Indonesia's annual economic growth is projected to reach 5.06 percent.

Despite the positive trend, Finance Minister Sri Mulyani Indrawati remains cautious about geopolitical risks and the upcoming US election, which could influence future policy directions.

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