Economists Say Iran Conflict and MSCI Issues Contribute to Rupiah Breaching Rp 17,500
JAKARTA, KOMPAS.com - The weakening of the rupiah today, which has breached the level of Rp 17,500 per US dollar, is attributed to a combination of geopolitical conflicts in the Middle East, domestic seasonal factors, and negative sentiment related to the Morgan Stanley Capital International (MSCI) index.
Executive Director of the Center of Economic and Law Studies, Bhima Yudhistira, stated that the market is currently concerned about the potential continuation of MSCI freezing or the absence of additional Indonesian stocks in the index because domestic capital market reforms are deemed not to meet the requirements.
“There is concern that the MSCI freezing will continue,” he told Kompas.com on Tuesday (12/5/2026).
Additionally, the market is beginning to worry about expansive fiscal policies solely aimed at driving high economic growth in the first quarter of 2026.
Therefore, Bhima predicts that the rupiah still has the potential to weaken further if global and domestic pressures continue to increase.
It is estimated that the Garuda currency will reach the level of Rp 17,845 per US dollar by the end of May 2025.
“The rupiah could continue to weaken; could the depreciation level reach Rp 17,845? The answer is very possible given the increasing domestic and external pressures,” he said.
Meanwhile, President Director of Doo Financial Futures, Ariston Tjendra, assessed that the current rupiah weakening is more driven by global sentiment spilling over into the domestic market.
The first pressure comes from the uncertainty in Iran-US war negotiations, which have not yet found common ground.
In fact, armed conflicts have occurred that could halt negotiations.
“This concern is driving the strengthening of the US dollar against other exchange rates,” Ariston said when contacted by Kompas.com on Tuesday.
Furthermore, the market also sees the US central bank (Federal Reserve) becoming increasingly reluctant to cut its benchmark interest rate amid rising crude oil prices, as well as increasing US employment data and inflation.
This condition further strengthens the US dollar exchange rate against the currencies of developing countries, including the rupiah.
On the other hand, the rise in global oil prices is also pressuring Indonesia as an oil-importing country because it requires more US dollars to meet energy import needs.