Rupiah Slips 20 Points as Fitch Revises Indonesia's Outlook to Negative

On Wednesday, 4 March 2026, the rupiah closed at 16,892 per US dollar, down 20 points or 0.12% from the previous close of 16,872. The session opened 58 points weaker at 16,930 per dollar, before finishing at 16,892. The decline reflected a combination of escalating tensions in the Middle East and a negative sentiment from international rating agencies, pressuring the rupiah in the spot market. Market analyst Ibrahim Assuaibi said the weakness reflected risk-off sentiment amid supply concerns as the Middle East conflict intensified. The situation deteriorated after Israel and the United States carried out additional strikes against Iran-linked facilities on March 3, with Iran responding by widening military deployments in the Gulf and issuing warnings to global shipping operators. Iran also targeted oil tankers transiting the Strait of Hormuz, a narrow waterway that handles about a fifth of global oil shipments, injecting a geopolitical risk premium into world oil prices and affecting energy markets. Domestically, Fitch Ratings revised Indonesia’s outlook from stable to negative, while the Long-Term Foreign Currency IDR remained at BBB. The revision signalled greater policy uncertainty and concern about the consistency and credibility of Indonesia’s policy mix amid increasing centralisation of decision-making. It could weigh on medium-term fiscal prospects, dampen investor sentiment, and challenge external resilience. Fitch projects Indonesia’s 2026 fiscal deficit at around 2.9% of GDP, higher than the government’s 2.7% target, reflecting more conservative revenue assumptions and higher social spending, including the Makan Bergizi Gratis (MBG) programme. Bank Indonesia has signalled close monitoring of inflationary pressures from higher global energy prices to safeguard rupiah stability and maintained market interventions across instruments as needed. The central bank’s actions are aimed at dampening rupiah volatility amid dual pressures from geopolitical developments and domestic credit considerations. In the legislature, Amelia Anggraini of the DPR’s Commission I cautioned that the US-Israel strike on Iran could escalate tensions in the Middle East. Analysts from INDEF note that the probability of further rupiah weakness in early trading remains elevated given ongoing Iran-Israel-US tensions and policy developments. Earlier, the rupiah traded around the low-16,800s region, with February 27 data showing the currency at 16,787 per USD amid Iran-US tensions and solar panel tariffs; and opening deals on March 4 indicated a further softening before the close. Bank Indonesia reiterates its commitment to monitor financial market dynamics closely and respond appropriately to preserve rupiah stability in the face of Middle East tensions.