Rupiah breaches Rp18,000 per dollar amid global and domestic pressures

The Rupiah is expected to weaken against the strengthening US dollar amid rising geopolitical tensions in the Middle East.

Jakarta (ANTARA) - The Rupiah’s exchange rate against the US dollar came under pressure again, falling 0.27 per cent to breach Rp18,015 per US dollar in trading on Thursday morning.

This level is one of the Rupiah’s weakest positions in recent times, marking the currency’s approach to a new psychological threshold of Rp18,000 per US dollar.

Currency analyst Lukman Leong of Doo Financial Futures assessed that this weakening reflects strong external pressures amid increasing global uncertainty, coupled with still unfavourable domestic sentiment.

“The Rupiah is expected to weaken against the strengthening US dollar amid rising geopolitical tensions in the Middle East,” Lukman told ANTARA in Jakarta on Thursday.

In addition, several US economic data released were better than market expectations, further strengthening the US currency.

US employment data and the Institute for Supply Management (ISM) services sector activity index, which showed stronger performance than expected, increased optimism about the US economy.

The combination of these factors has increased demand for the US dollar and put pressure on emerging market currencies, including the Rupiah.

Meanwhile, domestic market sentiment is also considered not strong enough to support the Rupiah’s movement.

However, Lukman expects the Rupiah’s weakening to be potentially contained by stabilisation measures taken by Bank Indonesia (BI). With the exchange rate returning to approach a new psychological level, the central bank is expected to increase the intensity of intervention in the financial market to maintain exchange rate stability.

“With still poor domestic sentiment, but approaching a new psychological level, Bank Indonesia is likely to intervene aggressively,” he added.

With this analysis, Lukman expects the Rupiah’s movement to remain volatile in the range of Rp17,900 - Rp18,050 per US dollar.