USD/IDR retakes 16,600 amid US tariff fears, some USD dip-buying

• USD/IDR reverses an intraday slide and is underpinned by a combination of factors.
• The market reaction to the BI intervention on Tuesday turns out to be short-lived.
• Political instability in Indonesia and a modest USD uptick lend support to spot prices. 

The USD/IDR pair attracts some dip-buyers near the 16,550 area during the Asian session on Wednesday and stalls the previous day's retracement slide from its highest level since the Asian financial crisis in 1998. Spot prices climb back to the 16,600 level in the last hour, though remain below the daily swing high. 

The Indonesian Rupiah (IDR) drew some support from the fact that Bank Indonesia (BI) on Tuesday intervened in the foreign exchange, domestic non-deliverable forwards, and bond markets to restore confidence. Adding to this, an official said this Wednesday that Indonesia's central bank will always monitor markets and intervene to stabilize the currency. The initial reaction, however, turns out to be short-lived amid political instability in Indonesia and unease over President Prabowo Subianto's policies. 

This, along with the uncertainty surrounding US President Donald Trump's trade tariffs and the emergence of some US Dollar (USD) buying, acts as a tailwind for the USD/IDR pair. Trump imposed a secondary tariff on Venezuela and said that any country that buys oil or gas from Venezuela would face a 25% tariff when trading with the US. Moreover, Trump is expected to announce retaliatory tariffs - that would offset levies on US goods and are set to take effect on April 2 - on about 15 major US trading partners.

Meanwhile, the USD regains positive traction and moves back closer to a nearly three-week high touched on Tuesday, though the upside seems limited in the wake of bets that the Federal Reserve (Fed) will resume its rate-cutting cycle soon. In fact, the US central bank maintained its forecast for two 25 basis points rate cuts by the end of this year and revised its growth outlook downward amid the growing uncertainty over the impact of Trump's aggressive trade policies. This might cap the USD gains and the USD/IDR pair.