Rupiah strengthens to Rp18,022 on Friday driven by falling crude oil prices

The rupiah exchange rate against the US dollar strengthened by 89 points, or 0.49 per cent, to close at Rp18,022 per US dollar at the end of trading on Friday, compared to the previous close of Rp18,111 per US dollar. Money market analyst Ibrahim Assuaibi stated that the rupiah’s appreciation was triggered by the downward trend in crude oil prices, following the easing of tensions in the Middle East and signs of increased traffic through the Strait of Hormuz. The Strait, which typically handles approximately one-fifth of global crude oil and liquefied natural gas shipments, has been a focal point for oil markets as much of the region has been blockaded since the start of the US-Israel conflict involving Iran on 28 February. Other sentiments stemmed from the Federal Reserve’s decision to keep interest rates unchanged, which aligned with market expectations. Fed Chair Kevin Warsh reportedly did not provide clear signals regarding the central bank’s plans for inflation and interest rates. However, the Fed’s decision was not unanimous, as three policymakers appeared to urge further interest rate hikes amidst persistent inflation. Additionally, US Personal Consumption Expenditures (PCE) data for June, which came in lower than expected, helped alleviate concerns regarding high inflation and interest rates. ‘This data is a key inflation indicator used by the Fed. However, the core PCE index remains well above the Fed’s annual target of 2 per cent, and the market appears to have already priced in the possibility of at least one interest rate hike by the Fed by the end of this year,’ Ibrahim noted.