Rupiah weakens as US-Iran conflict escalates

The rupiah exchange rate weakened at Thursday’s close, falling 45 points or 0.25 percent to Rp17,989 per US dollar from the previous Rp17,944 per US dollar.

Analyst Rully Nova of Bank Woori Saudara stated that the rupiah’s depreciation was driven by the escalating conflict between the United States, Israel, and Iran.

“The rupiah’s weakening in today’s trading was influenced by global risk factors, specifically the increased geopolitical escalation involving the US, Israel, and Iran,” he said in Jakarta on Thursday.

Citing Anadolu, southern Iran was the target of the latest series of US attacks, with blasts and airstrikes reported in the Kargan area of Minab City. Explosions were also heard in Bandar Abbas, while Iranian media reported detonations and active air defence systems in the Jask, Qeshm and Sirik areas of Hormozgan Province.

The development followed a statement from US Central Command (CENTCOM) that American forces had conducted a series of additional “self-defence” strikes against targets in Iran. CENTCOM said the strikes were carried out under direct instructions from US President Donald Trump in response to what they described as Iran’s “continued aggression”.

Iran’s Islamic Revolutionary Guard Corps (IRGC) announced that 18 US military asset points in Kuwait and Bahrain had been targeted amid the renewed escalation in regional tensions. The IRGC listed among its targets the Ali Al Salem and Ahmad Al Jaber air bases in Kuwait, as well as the Sheikh Isa air base in Bahrain.

Further sentiment came from declining market appetite for government bonds, which pushed yields higher. “The 10-year yield rose 10 bps to 7.45 percent, the 8-year rose 17 bps to 7.46 percent, and the 5-year tenor gained 2 bps to 7.47 percent,” Rully revealed.

Bank Indonesia’s Jakarta Interbank Spot Dollar Rate (JISDOR) also moved weaker to the level of Rp17,981 per US dollar, from Rp17,971 per US dollar previously.