Why Is the Rupiah Expected to Weaken in September?

September 1, 2026 | 10:24 am

TEMPO.CO, Jakarta – The Indonesian rupiah is expected to weaken against the U.S. dollar in September 2026, pressured in part by hawkish signals from Federal Reserve Chair Kevin Warsh, according to Mirae Asset Sekuritas Indonesia Senior Market Analyst M. Nafan Aji Gusta Utama.

“Markets are still debating whether Warsh's signals will actually translate into an interest rate hike in September,” Nafan told Tempo on Monday, August 31, 2026.

Speaking at the Jackson Hole Symposium last week, Warsh said U.S. inflation remained above the Federal Reserve's 2 percent target. Inflation, measured by the Personal Consumption Expenditures (PCE) price index, stood at 3.7 percent over the past 12 months and 4.1 percent over the past six months.

Warsh also noted that the U.S. unemployment rate stood at 4.1 percent, which remains historically low and has been relatively stable in recent years. Labor market turnover has also remained relatively subdued, reflecting limited movement in job matching between employers and workers.

Nafan said the rupiah's volatility this month will also depend on upcoming U.S. economic data, particularly inflation and labor market figures, ahead of the Federal Open Market Committee (FOMC) meeting.

“The rupiah is likely to remain volatile and trade defensively,” he said.

However, Nafan said pressure on the rupiah could ease if U.S. economic data point to a slowdown or if inflation declines faster than expected. Such developments could reduce expectations of further increases in the Fed funds rate.

Despite pressure on the rupiah, upcoming Indonesian government bonds could become more attractive to investors if the government raises their yields compared with previous issuances, he said.

“As long as expectations of higher U.S. interest rates remain elevated, pressure on the rupiah and government securities should continue to be closely watched,” Nafan said.

The rupiah closed weaker at Rp17,726 per U.S. dollar on Monday, compared with Rp17,655 per dollar a week earlier, before Warsh delivered his Jackson Hole speech.

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