Indonesia: Rupiah Under strain as Dollar Rises, Fiscal Concerns Mount.

The Indonesian rupiah slipped to near IDR 17,900 per U.S. dollar on Thursday, extending its recent decline as the dollar index hovered near a two-month high amid surging U.S. Treasury yields and bets on further policy tightening following solid U.S. private-sector activity. Locally, fundamentals remained weak, pressured by softer consumer confidence and sluggish household spending. Fiscal worries added pressure as higher oil prices lifted budget risks while lawmakers pushed to amend the State Finance Law to allow deficits above 3% of GDP. Bank Indonesia has sought to support the currency through measures beyond interest rates, including raising the FX swap hedging incentive to 25% to encourage foreign capital inflows and curb speculative pressure. The central bank kept its benchmark rate at 5.75% for a third month in September after raising it by a cumulative 100bp in three moves since May. The rupiah has weakened about 0.8% so far this week, setting up a second straight weekly loss.