Why the Fed Rate Still Moves USD/IDR, Even When the Fed Does Nothing
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7 min read
On 29 July 2026, the US Federal Reserve did nothing. No cut, no hike, the federal funds rate stayed exactly where it was. And yet USD/IDR kept climbing in the days around it, on its way past Rp 18,000 again. If you hold anything priced in US dollars, from a US stock to a stablecoin, while your own costs are in rupiah, that gap between "the Fed did nothing" and "the rupiah moved anyway" is not a contradiction. It is how the Fed rate and USD/IDR actually connect, and it is worth understanding in plain terms rather than through a headline.
The mechanism is called the interest rate differential: the gap between what you earn holding US dollar deposits or bonds versus Indonesian rupiah ones. When Bank Indonesia's policy rate, the BI rate, sits well above the US federal funds rate, holding rupiah pays more, which in theory pulls foreign capital toward rupiah assets and supports the currency. That flow is often called a carry trade: borrowing in the low-rate currency to hold the high-rate one and pocket the difference.
A basis point, if that term is new, is one hundredth of a percent, so a move from 5.50% to 5.75% is 25 basis points. When the Fed is expected to cut, the theory says the gap should widen further in rupiah's favor, supporting IDR. When the Fed holds or hikes, the gap narrows, which theoretically should weaken IDR. That is the textbook version. What actually happened in 2026 shows why the textbook version is only half the story.
The Fed has not cut once in 2026. It has held the federal funds rate at 3.50% to 3.75% through two consecutive meetings under new Fed Chair Kevin Warsh:
| Meeting date | Decision | New range | Vote |
|---|---|---|---|
| 17 Jun 2026 | Hold | 3.50%–3.75% | 12–0 |
| 29 Jul 2026 | Hold | 3.50%–3.75% | 9–3, three dissents wanting tighter policy |
The three dissenting regional presidents, Beth Hammack of Cleveland, Neel Kashkari of Minneapolis and Lorie Logan of Dallas, wanted to raise rates further, arguing inflation has stayed above the Fed's 2% target for more than five years. The Committee's own projections back that hawkish lean: the median estimate for where the fed funds rate ends 2026 was raised to 3.8%, and no rate cuts are currently penciled in for the rest of the year. The next decision lands in September 2026.
Source: Federal Reserve FOMC statements and CNBC's coverage of the June and July 2026 meetings, retrieved 3 August 2026.
Bank Indonesia's own rate sits well above the Fed's. After a rupiah crisis pushed BI into an emergency hike in June 2026, taking the BI rate to 5.75%, the Board of Governors held it there again at its 21 to 22 July 2026 meeting, ending speculation of a further hike to 6%. Instead of tightening further, BI is leaning on incentive policies to draw foreign capital into Indonesian markets while keeping inflation inside its 2.5%, give or take one percentage point, target band for 2026 and 2027.
Source: Bank Indonesia policy statement, 22 July 2026, as reported by ING THINK and TradingEconomics, retrieved 3 August 2026.
Put the two rates side by side: a BI rate of 5.75% against a federal funds rate midpoint of about 3.625% is roughly a 212 basis point gap in rupiah's favor, and that gap has stayed wide because the Fed is not cutting into it. By carry trade logic, that should be a good setup for the rupiah.
On 22 July 2026, the day BI held its rate, USD/IDR sat around Rp 17,917. By early August 2026, it had moved past Rp 18,000, trading around Rp 18,010 to 18,037. The rate differential did not shrink in that window. The rupiah weakened anyway, which means something other than the rate gap was doing the driving.
Three forces stand out, all documented at the time:
Source: EBC Financial Group and TradingView market reporting on rupiah drivers through mid-2026, and Investing.com USD/IDR spot data, retrieved 3 August 2026.
This is not abstract if your portfolio includes US-listed stocks, dollar-denominated crypto, or any asset priced outside rupiah. The currency move happens to your position whether or not the asset itself does anything.
Here is the scale of it: the rupiah's depreciation against the dollar reached 8.75% since the start of 2026 by mid-July, according to market reporting at the time. That means a hypothetical $1,000 position in a US-listed stock that did not move a single cent in price would still have been worth roughly 8.75% more in rupiah terms over that stretch, purely from the currency, before any gain or loss in the stock itself is counted.
That is exactly the kind of move that gets buried inside a single portfolio total if you are only looking at the number in your base currency. It is real return, but it is a different kind of return than the asset actually performing well, and it can reverse just as fast if the rupiah stabilises or strengthens.
Rather than estimating how much of your portfolio's recent move came from currency and how much came from the assets themselves, NetWort's Currency Exposure view breaks that out directly: how much of your value change is FX impact versus asset performance, tracked against the same USD/IDR rate and the US Dollar Index covered here. You can see the live Fed rate, BI rate and USD/IDR together on the Macro Context page, and how BI's own rate decisions have played through to the IHSG in our earlier look at the five 2025 BI rate cuts.