Rupiah weakens as safe-haven asset demand rises

The rupiah weakened by 5 points or 0.03% to Rp17,749 against the US dollar on Tuesday morning, compared to the previous close of Rp17,744 per dollar.

ICDX Research and Development’s Muhammad Amru Syifa attributed the rupiah’s weakness to increased demand for safe-haven assets and expectations of prolonged high US interest rates.

“The rupiah is expected to fluctuate with continued pressure in the range of Rp17,750 to Rp17,800 per dollar. The pressure on the rupiah remains influenced by the strong US dollar globally due to heightened safe-haven asset demand and expectations of sustained high US interest rates,” he said.

The US dollar’s strength was reflected in the Dollar Index (DXY) rising to 99.10, driven by heightened geopolitical uncertainty regarding US-Iran tensions.

Rising Middle East tensions have also led investors to reduce risky assets and shift to the US dollar as a safe haven.

“Rising US government bond yields and high global market volatility have further pressured emerging market currencies, including the rupiah,” Amru added.

“The trade surplus narrowed to $7.98 billion from $13.07 billion amid global economic slowdown and increased demand for dollars in the domestic market due to higher energy and capital goods imports,” he said.