Rupiah weakens amid escalating geopolitical tensions
The rupiah exchange rate closed lower in today’s trading, weakening by 152 points or 0.84 per cent to Rp18,188 per US dollar from the previous Rp18,036 per US dollar. Money market analyst Ibrahim Assuaibi noted that the rupiah’s decline is driven by escalating geopolitical tensions following Israeli attacks on Iran.
“The sound of explosions heard in Tehran, Tabriz, and Isfahan erodes hopes for an immediate end to a wider war and the resumption of crude oil flows through the Strait of Hormuz,” he stated in a written briefing in Jakarta on Monday. Israel has claimed responsibility for attacking a petrochemical plant in southwestern Iran, alongside other strikes on military targets. This occurs despite reports that US President Donald Trump has requested Israeli Prime Minister Benjamin Netanyahu to exercise restraint regarding further attacks.
While Iran launched a barrage of missiles at Israeli targets in retaliation for Israeli strikes on Lebanon, Trump has insisted that a deal to end a broader conflict remains achievable. The Israeli Prime Minister’s Office previously stated that the Israeli military struck the southern suburbs of Beirut in Lebanon in response to Hezbollah’s rocket fire. According to the Lebanese National News Agency (NNA), Israeli airstrikes hit two apartment buildings in a residential area, with no casualties reported. Hezbollah’s operations were triggered by ongoing Israeli strikes on dozens of settlements in southern Lebanon.
Furthermore, US economic data for May showed the addition of 172,000 non-farm payroll (NFP) jobs, significantly exceeding the expected 85,000. April’s payroll figures were also revised upwards to 179,000 from 115,000, while the unemployment rate remained stable at 4.3 per cent. “The stronger-than-expected NFP report supports the argument for the Fed to keep interest rates unchanged or even raise them, as officials assess the inflationary impact of higher energy prices,” said Ibrahim. The Bank Indonesia Jakarta Interbank Spot Dollar Rate (JISDOR) also weakened to Rp18,171 per US dollar from the previous Rp18,039 per US dollar.