Rupiah Closes Weaker at 18,049 per US Dollar
The rupiah exchange rate closed weaker on Thursday afternoon, dropping 0.46 per cent to Rp 18,049 per US dollar from the previous Rp 17,966. Money market analyst Ibrahim Assuaibi noted that the rupiah’s decline was driven by a combination of external and domestic sentiments weighing on the currency’s movement.
Externally, investors are exhibiting caution amid escalating geopolitical tensions in the Middle East. While Washington announced a ceasefire agreement between Israel and Lebanon on Wednesday night, the deal remains contingent on Hezbollah ceasing hostilities. Tensions have been further stoked by reports of Iranian missile attacks on Kuwait and Bahrain, as well as US strikes on Qes_hm Island in Iran near the Strait of Hormuz. Additionally, Israel has reportedly expanded military operations in southern Lebanon, targeting Hezbollah-controlled areas.
In the United States, the Republican-controlled House of Representatives has approved a resolution to limit President Donald Trump’s ability to continue military conflict with Iran, though the resolution still requires Senate approval and a two-thirds majority in both chambers to override a potential presidential veto. Market players are also awaiting the release of US employment data, specifically the non-farm payrolls report due on Friday.
Domestically, Ibrahim highlighted growing market concerns regarding the impact of surging crude oil prices on Indonesia’s fiscal and external sectors. High oil prices could potentially push the fiscal deficit towards the 3 per cent limit and pressure the external balance. Furthermore, the market is closely watching for potential increased government intervention in the commodities sector and the ongoing uncertainty regarding Indonesia’s market classification by MSCI. April trade data also indicated a shrinking trade surplus as rising oil imports outpaced export growth. Meanwhile, May inflation rose to 3.08 per cent, exceeding the midpoint of Bank Indonesia’s target due to higher import costs.
Another significant sentiment driver is the recent rating by Moody’s Ratings for PT Danantara Investment Management. The agency assigned a Baa2 rating to the company’s global medium-term note programme but assigned a negative outlook. Moody’s stated that this outlook reflects the strong link between Danantara Investment Management, the Danantara Investment Management Agency (BPI Danantara), and the Indonesian Government as the sole shareholder. Consequently, the rating is expected to move in tandem with Indonesia’s sovereign rating.
Ibrahim predicts that the rupiah exchange rate will remain volatile in the next trading session, with the potential to close weaker in the range of Rp 18,050 to Rp 18,120 per US dollar.