The Indonesian Rupiah is under pressure against the US Dollar, with USD/IDR trading around 17,950 during early European hours on Monday ahead of key domestic economic releases. The pair is advancing as markets await September foreign exchange reserves and August retail sales figures, while Indonesia's external position remains fragile despite an August trade surplus, as elevated import demand and rising energy costs weigh on its balance of payments. Safe-haven demand for the US Dollar has been driven by sharply deteriorating geopolitical conditions in the Middle East, after Saudi-backed forces in Yemen launched a major offensive to reclaim territory from Houthi forces and the Iran-aligned group seized control of the Bab el-Mandeb strait, a critical maritime chokepoint between the Red Sea and the Gulf of Aden that serves as a vital bypass route for regional crude exports avoiding the Strait of Hormuz. Shifting US monetary policy expectations are also shaping sentiment, with the CME FedWatch Tool showing markets now price in nearly an 82% chance the Federal Reserve will hold benchmark rates steady at its upcoming meeting, up from 74% before the labor report. Analysts at MUFG/BTMU said the September US nonfarm payrolls report weakened the case for an October Fed hike, noting payrolls rose by 29k, below the 90k consensus and down from a downwardly revised 133k in August, while the unemployment rate edged up to 4.2% from 4.1% as labor-force growth outpaced employment gains.
Middle East escalation and Bab el-Mandeb seizure drive safe-haven USD demand, pressuring the rupiah.
