Rupiah weakens amid volatile oil prices

Oil prices remain highly volatile in recent trading sessions as markets react to conflicting headlines surrounding ceasefire negotiations. The rupiah closed today down 35 points or 0.20% at Rp17,881 per US dollar from Rp17,846. Currency analyst Ibrahim Assuaibi attributed the weakness to oil price volatility. “Oil prices remain highly volatile in recent trading sessions as markets react to conflicting headlines surrounding ceasefire negotiations,” he said in a written statement in Jakarta on Friday. Market sentiment had improved following reports that Washington and Tehran had reached a draft agreement to extend the ceasefire for 60 days, with negotiations continuing on Iran’s nuclear programme and regional security issues. The ceasefire prospects eased concerns over immediate supply shortages and raised hopes that shipping through the Strait of Hormuz could gradually normalise. However, traffic through the strategic waterway remains well below pre-conflict levels, keeping geopolitical risk premiums in oil markets. Additional sentiment came from US economic data, including unexpected inflation and growth figures, which reinforced expectations that the Federal Reserve may keep interest rates higher for longer. Domestically, the US Federal Reserve’s decision to hold interest rates at high levels triggered capital outflows from emerging markets, including Indonesia. “Investors are shifting assets to lower-risk US instruments such as bonds, which offer more attractive yields,” Ibrahim said. Bank Indonesia’s Jakarta Interbank Spot Dollar Rate (JISDOR) also weakened to Rp17,883 per US dollar from Rp17,789.