Rupiah remains shadowed by geopolitical uncertainty and domestic pressure
The Rupiah exchange rate came under renewed pressure during Tuesday morning trading, driven by rising global geopolitical uncertainty and concerns regarding domestic economic conditions. The Rupiah was recorded weakening by 54.50 points, or 0.31 per cent, to Rp17,859 per US Dollar on Tuesday morning, compared to the previous closing position of Rp17,805 per US Dollar.
Rully Nova, an analyst at Bank Woori Saudara, told ANTARA in Jakarta on Tuesday that the depreciation of the Indonesian currency is being triggered by the uncertain resolution of the conflict between the US and Iran. According to him, this situation has pushed the US Dollar Index back towards the psychological level of 100, while simultaneously increasing expectations for a rise in global oil prices.
“The Rupiah in today’s trading is expected to weaken within the range of Rp17,800 - Rp17,950, influenced by global geopolitical risks and the uncertainty surrounding the US-Iran conflict resolution, which has resulted in the dollar index rising towards 100 and increased expectations for rising oil prices,” Rully explained.
From a domestic perspective, Rully noted that the market is also closely monitoring several internal challenges. The government’s fiscal condition, uncertainty regarding policy direction, and the projected continuing trend of inflation are factors limiting the Rupiah’s potential for appreciation.
Similar views were expressed by Lukman Leong, a currency analyst at Doo Financial Futures. He stated that the Rupiah’s weakness continues following Iran’s announcement to halt peace negotiations with the US and its plan to fully close the Strait of Hormuz, one of the world’s most critical energy shipping lanes. The closure of this route could potentially disrupt global oil distribution and trigger a surge in energy prices, thereby increasing demand for safe-haven assets such as the US Dollar.
“The Rupiah has the potential to weaken against the US Dollar, which is strengthening in response to Iran’s statement regarding the cessation of peace talks with the US and the plan to fully close Hormuz,” said Lukman.
In addition to geopolitical factors, US manufacturing data that exceeded expectations has further bolstered the US Dollar’s position. “The strengthening of the US Dollar is also supported by stronger-than-expected manufacturing data. The expected range is Rp17,800 - Rp17,900,” he added.