Iran Conflict with US-Israel: Bank Indonesia Ensures Rupiah Moves in Line with Fundamentals

Jakarta — Bank Indonesia (BI) will continue to carefully monitor market movements and respond appropriately, including ensuring the rupiah’s exchange rate moves in line with its fundamentals, following the conflict between Iran and the United States-Israel that has driven risk-off sentiment.

Erwin Gunawan Hutapea, Head of BI’s Monetary Management and Securities Asset Division, stated in Jakarta on Monday that the central bank will remain in the market to conduct interventions.

The approach will be pursued through non-deliverable forward (NDF) transactions in overseas markets as well as spot transactions and domestic non-deliverable forward (DNDF) transactions in the domestic market.

“BI will also continue to optimise its policy to increase the effectiveness of interest rate policy transmission,” said Erwin.

Currency analyst Lukman Leong from Doo Financial Futures projects the rupiah will weaken on Monday as a result of the conflict between Iran and the US.

The rupiah is expected to weaken in the range of Rp16,750-Rp16,900 per US dollar. The depreciation of the rupiah is caused by market participants’ tendency to avoid risky assets and move funds to assets considered safer.

On Saturday (28 February), the US and Israel launched a series of attacks on several targets in Iran, including Tehran. Previously, the third round of US-Iran negotiations regarding Tehran’s nuclear programme ended on Thursday (26 February) evening in Geneva.