Rupiah Weakens as US Strikes Iran
The Rupiah exchange rate closed lower in Wednesday afternoon trading, dropping 34 points or 0.19 per cent to Rp18,014 per US Dollar from the previous Rp17,980 per US Dollar.
Money market analyst Ibrahim Assuaibi assessed that the Rupiah’s weakness was triggered by US attacks on Iran.
“US Central Command (Centcom) stated that it has commenced a series of attacks against Iran, aimed at imposing what is described as a ‘heavy cost’ for Tehran’s attacks on commercial shipping,” he said in a written statement in Jakarta on Wednesday.
The ongoing escalation is creating larger shipping issues in the Strait of Hormuz, sparking concerns regarding supply disruptions in the Middle East.
The attacks also occurred shortly after the US withdrew key concessions that allowed Iran to sell oil internationally, a move that signals a tighter oil market in the coming weeks.
Previously, Iran was reported to have attacked vessels attempting to traverse the Strait of Hormuz this week, increasing tensions with the US and creating further uncertainty regarding the status of this vital waterway.
“The latest round of hostilities has the potential to undermine agreements, with future peace talks between the two nations now appearing uncertain,” he added.
Other sentiment stems from the rise in US government bond yields. The 10-year US Treasury yield rose by 5.5 basis points to 4.525 per cent. Nevertheless, he continued, money markets remain sceptical regarding a rate hike at the Fed’s July meeting, but the probability for September is approaching 60 per cent, according to the CME FedWatch Tool.
“Traders are now shifting their attention to the minutes of the June Federal Open Market Committee (FOMC) meeting, which will be released later tonight on Thursday at 01:00 WIB, to gain further insight into the Fed’s thinking,” Ibrahim stated.
Bank Indonesia’s Jakarta Interbank Spot Dollar Rate (JISDOR) also moved weaker today, reaching the level of Rp18,005 per US Dollar from the previous Rp17,988 per US Dollar.