The Fed Holds Rates. Why Is the Rupiah Still Weak?

The Federal Open Market Committee kept the federal funds target range at 3.75% to 4.00% at its October 28, 2026 meeting. The decision passed by a 10 to 2 vote. Lisa D. Cook and Beth M. Hammack preferred a 25-basis-point increase.

The rupiah strengthened modestly after the announcement. Indonesia's spot exchange rate opened at Rp18,141 per US dollar on October 29, compared with the previous close of Rp18,184, according to ANTARA. The 43-point, or roughly 0.24%, improvement provided limited relief, while the exchange rate remained near Rp18,100 per dollar.

Official JISDOR data placed the rupiah at Rp18,183 per dollar on October 28, compared with Rp17,985 on October 20. Using the same reference-rate series, the rupiah weakened by approximately 1.10% over that period. The October 28 JISDOR figure was set before the Fed decision was released early on October 29 in Indonesia, so it cannot be presented as a post-FOMC reaction.

The rupiah has not recovered sharply because the Fed decision matched expectations, the future policy path did not become clearly more accommodative, and domestic dollar demand remains elevated. Portfolio flows, asset yields, geopolitical risk, and Bank Indonesia's policy response are also influencing the exchange rate.

The Fed Held Rates Without a Strong Dovish Signal

The Federal Reserve's official statement said US economic activity was expanding at a strong pace. Domestic spending remained resilient, productivity growth was strong, and capital investment was robust. Inflation also remained above the central bank's objective.

Two FOMC members voted for a 25-basis-point increase, showing that tightening risk had not fully disappeared. Holding rates therefore did not provide a clear signal that cuts were imminent.

Financial markets react to the difference between a policy decision and what investors had already expected. When the result matches the consensus, much of its effect is already embedded in the dollar, bond yields, and emerging-market currencies. The rupiah would receive a stronger catalyst if the Fed caused future rate expectations to move materially lower.

The FOMC maintained the federal funds target range at 3.75% to 4.00% in a 10 to 2 vote. Two members preferred a 25-basis-point increase. Source: Federal Reserve, October 28, 2026.

The Rupiah Had Weakened Before the FOMC Decision

Bank Indonesia's JISDOR rose from Rp17,985 per US dollar on October 20 to Rp18,183 on October 28. A higher number of rupiah required to buy one dollar represents a weaker rupiah.

The calculation is:

Exchange-rate change = (Rp18,183 ÷ Rp17,985 - 1) × 100% = approximately 1.10%

This period ended before the FOMC announcement. The eight-day depreciation therefore cannot be described as a response to the Fed's October 28 decision.

Bank Indonesia's third-quarter Monetary Policy Report said the rupiah had already weakened by 0.61% point to point from the end of September to Rp17,985 on October 20. BI attributed the pressure to geopolitical escalation in the Middle East, tighter US monetary policy, and foreign-investor sentiment toward Indonesian equities.

JISDOR increased from Rp17,985 to Rp18,183 per US dollar between October 20 and October 28, 2026, equivalent to rupiah depreciation of about 1.10%. Source: Bank Indonesia. 

Four Reasons the Rupiah Has Not Recovered Sharply

The US policy rate is one component of exchange-rate formation. Four channels explain why the rupiah remains weak even after the Fed held rates.

A. The Fed Decision Was Already Expected

Markets had broadly expected the federal funds target range to remain at 3.75% to 4.00%. A consensus outcome usually produces a smaller reaction than an unexpected increase or cut.

The two dissents in favor of a 25-basis-point increase also limited the dovish interpretation. Investors still need US inflation, economic-activity, and labor-market data before estimating the next policy decision.

B. The Interest-Rate Differential Does Not Guarantee Inflows

Bank Indonesia maintained the BI-Rate at 5.75% on October 21. Using the 3.875% midpoint of the Fed's target range, the nominal gap with the BI-Rate is approximately 1.875 percentage points, or 187.5 basis points.

That calculation is not the return available to an investor. Foreign investors assess actual government-bond or rupiah-instrument yields, hedging costs, currency risk, liquidity, taxes, and possible capital losses. A positive policy-rate differential does not automatically produce capital inflows.

C. Portfolio Flows Remain Uneven

Bank Indonesia reported net foreign portfolio inflows of US$0.66 billion in the fourth quarter through October 19, 2026. The composition was mixed. Equities recorded outflows, while SRBI and Indonesian government bonds received inflows.

This split explains why an aggregate net inflow may fail to strengthen the rupiah immediately. Foreign selling of Indonesian shares can still generate demand to convert rupiah proceeds into foreign currency, while bond inflows may reverse when global yields or domestic risks change.

BI also reported negative Rp6.54 trillion in net nonresident SRBI transactions between October 19 and October 22. The four-day period is too short to establish a broader capital-flow trend, but it demonstrates how demand for rupiah assets can change quickly.

D. Domestic Dollar Demand Remains High

Importers, companies with foreign-currency debt, dividend payments, and end-of-month obligations can increase demand for US dollars. These transactions may limit rupiah gains even when international sentiment improves.

Geopolitical risks also affect energy prices and Indonesia's foreign-exchange requirements. Higher oil prices may increase dollar demand for energy imports, while stronger demand for safe assets can support the US currency.

How Bank Indonesia Is Responding

Bank Indonesia's October 20 to 21 Board of Governors Meeting maintained the BI-Rate at 5.75% and the Lending Facility rate at 6.50%, while raising the Deposit Facility rate to 5.00%.

BI also strengthened its exchange-rate operations through offshore NDF transactions, domestic spot intervention, and Domestic Non-Deliverable Forwards. It increased DNDF incentives for foreign funding while continuing swap and Local Currency Transaction incentives.

These instruments are intended to improve foreign-currency supply and risk management. Intervention can reduce excessive volatility and keep transactions functioning, although it cannot eliminate every source of pressure when the dollar strengthens globally or domestic demand for foreign currency rises.

Indonesia's US$146.32 billion in foreign-exchange reserves at the end of September provides a buffer for stabilization. Reserve use still needs to be managed carefully because the reserves also support confidence in Indonesia's capacity to finance imports and external obligations.

Why the Rupiah Matters to Indonesian Crypto Investors

Bitcoin's rupiah price contains two components:

BTC price in rupiah = BTC price in US dollars × USD/IDR exchange rate

Using a Bitcoin price of US$80,304.86, two JISDOR levels produce different rupiah values:

• At Rp17,985 per dollar, 1 BTC is worth approximately Rp1.444 billion.

• At Rp18,183 per dollar, 1 BTC is worth approximately Rp1.460 billion.

• The difference is approximately Rp15.90 million per BTC.

The calculation holds the dollar price of Bitcoin constant and excludes spreads, trading fees, and possible differences between USDT and the US dollar. It illustrates how rupiah depreciation can raise the local-currency price of a crypto asset even when its dollar price is unchanged.

Indonesian traders should separate BTC/USD movement from USD/IDR movement. A higher Bitcoin price in rupiah does not necessarily indicate stronger global demand for BTC if part of the increase comes from a weaker local currency.

Data That Will Determine the Rupiah's Next Move

The next Federal Reserve decision will be only one catalyst. The rupiah will also depend on:

• US inflation and labor-market data.

• Treasury yields and the dollar index.

• Foreign flows into Indonesian equities, government bonds, and SRBI.

• Oil prices and Indonesia's energy-import requirements.

• Domestic inflation, trade, and foreign-reserve data.

• The intensity of Bank Indonesia's spot, NDF, and DNDF operations.

A more durable rupiah recovery would involve lower US yields, broader foreign inflows across Indonesian asset classes, and softer domestic dollar demand. One stronger trading session after the FOMC meeting is insufficient to establish a new trend.

Why Does the Rupiah Remain Weak?

The Fed held rates, but the outcome was expected and did not carry a strong easing signal. The rupiah strengthened slightly at the October 29 open while remaining near Rp18,100 per US dollar.

Earlier pressure came from a combination of US policy expectations, foreign equity outflows, domestic foreign-currency demand, and geopolitical risk. Bank Indonesia has responded through interest rates, intervention, and hedging incentives, but the exchange rate still reflects the balance between dollar supply and demand.

US inflation, Treasury yields, the composition of Indonesian capital flows, and BI's ability to maintain stability without constraining domestic liquidity will shape the next move. Those indicators provide more information than the Fed's decision to hold rates on its own.

Disclaimer

This material is provided for educational purposes and does not constitute investment, foreign-exchange, or crypto trading advice. Exchange rates, yields, Bitcoin prices, and capital flows may change after publication. The interest-rate differential and BTC-to-rupiah calculations are illustrative and exclude hedging costs, spreads, taxes, trading fees, and liquidity conditions. Conduct independent research before making a financial decision.