Rupiah Weakens as US Strikes Iran

The rupiah exchange rate at the close of trading on Wednesday afternoon weakened by 34 points, or 0.19 percent, to Rp18,014 per US dollar from the previous Rp17,980 per US dollar. Money market analyst Ibrahim Assuaibi assessed that the rupiah’s depreciation was triggered by US attacks on Iran. “The US Central Command (Centcom) said it had launched a series of strikes against Iran, aimed at imposing what it described as a ‘heavy cost’ for Tehran’s attacks on commercial shipping,” he stated in a written note in Jakarta on Wednesday. The ongoing escalation raises larger shipping issues in the Strait of Hormuz, sparking concerns about supply disruptions in the Middle East. The strikes also came shortly after the US withdrew a key concession that allowed Iran to sell oil internationally, a move that signals tighter oil markets in the coming weeks. Previously, Iran was reported to have attacked vessels attempting to cross the Strait of Hormuz this week, heightening tensions with the US and triggering more uncertainty about the status of the critical waterway. “The latest round of hostilities could potentially derail the agreement, with future peace talks between the two countries now appearing uncertain,” he said. Another sentiment stemmed from rising US government bond yields. The yield on the 10-year US Treasury note rose 5.5 basis points to 4.525 percent. Nevertheless, he noted that money markets are sceptical about an interest rate hike at the Fed’s July meeting, but for September, the probability is approaching 60 percent, according to the CME FedWatch Tool. “Traders are now shifting their attention to the minutes of the Federal Open Market Committee (FOMC) meeting in June, which will be released later tonight in the early hours of Thursday at 01.00 a.m. Western Indonesian Time, for further insight into the Fed’s thinking,” Ibrahim said. The Jakarta Interbank Spot Dollar Rate (JISDOR) set by Bank Indonesia also moved weaker today to Rp18,005 per US dollar from the previous Rp17,988 per US dollar.