Rupiah Stagnant, US Dollar Steady at Rp17,980 This Morning

The rupiah opened flat against the US dollar on Friday, holding at Rp17,980 per dollar. This followed a sharp 0.44% gain in the previous session, which pushed the currency back below the Rp18,000 threshold. Meanwhile, the US dollar index, which measures the greenback against six major peers, was steady at 100.753 in early trading after strengthening 0.28% the day before. The rupiah’s movement is expected to remain influenced by external sentiment, particularly global dollar dynamics and developments in the Middle East conflict. The dollar was broadly stable on Friday but on track for a weekly decline. Weaker-than-expected US inflation data prompted market participants to scale back bets on near-term interest rate hikes by the Federal Reserve. Other data indicated the US economy remains fairly robust, supported by a stable labour market. Nonetheless, economists anticipate the Fed will hold rates steady at its upcoming meeting following the moderation in consumer inflation during June. Fed officials remain cautious, however, as the improvement in inflation has only been observed for one month after several months of increases. Vice Chair Philip Jefferson even left the door open for further rate hikes if inflation does not show sustained improvement. According to the CME FedWatch Tool, the probability of a rate hike in July has fallen to 11%, down from 25% a week ago. Markets are also pricing in around 26 basis points of tightening by December, compared to 44 basis points earlier in the week. Market sentiment was also weighed down by renewed tensions between Iran and the US. Both nations have escalated attacks over the past week, nearly collapsing a ceasefire agreement reached last month. The escalation has boosted demand for safe-haven assets, including the US dollar, while pushing oil prices near one-month highs. Market participants are also awaiting a speech by US President Donald Trump, which could provide further clues on the direction of the conflict.