Rupiah Weakens to Rp 17,002, Geopolitical Tensions and the Fed as Triggers
JAKARTA, KOMPAS.com - The rupiah exchange rate in the spot market weakened during trading on Monday (30/3/2026). The rupiah closed down 0.13 per cent or 22 points at the level of Rp 17,002 per US dollar.
Currency and commodity analyst Ibrahim Assuaibi assessed that the pressure on the rupiah was triggered by a still cautious global market environment. Geopolitical tensions in the Middle East were the main factor.
Tensions escalated after the Iran-backed Houthi group in Yemen launched attacks on Israel over the weekend. These attacks are seen as potentially opening a new front in the conflict and disrupting shipping routes in the Red Sea.
“The market remains cautious about the potential escalation of war with Iran after the Yemen-based, Iran-supported Houthi group attacked Israel over the weekend. The Houthi group could open a new front in the war, given their capability to launch attacks in the Red Sea,” Ibrahim told reporters on Monday afternoon.
US President Donald Trump stated that negotiations with Iran are still ongoing. He assessed that the chances of an agreement remain open, though he did not provide a clear deadline. Trump also warned of the potential for further attacks on Tehran.
Trump had previously extended the deadline for potential attacks on Iran’s energy infrastructure until early April. Iran continues to refuse direct talks with the US since the conflict intensified at the end of February.
From an economic perspective, US consumer sentiment showed signs of weakening. The University of Michigan survey recorded the sentiment index dropping to 53.3 in March from the previous 55.5. This figure was below market expectations of 54.
Expectations for inflation over the next 12 months rose from 3.4 per cent to 3.8 per cent. Projections for long-term inflation over five years remained at 3.2 per cent.
This situation strengthens market expectations regarding the direction of the Federal Reserve’s interest rate policy. The market sees the possibility of rate hikes still open amid the surge in energy prices due to geopolitical conflicts.
Domestically, Ibrahim assessed that budget efficiency policies need to be balanced with other strategies. This step is important to maintain the state budget deficit.
He explained that fiscal pressures are structural in nature. They stem from energy subsidies, rising debt interest costs, and the need for priority spending.
Room for budget efficiency still exists but is limited. The government needs to be selective, especially in non-priority spending. The structure of state spending is seen as increasingly tight, particularly in energy subsidies, employee spending, and debt interest payments.
The effectiveness of budget efficiency can be measured by several indicators. These include improvements in programme impact, betterment of the ICOR or Incremental Capital Output Ratio, and shifts towards productive spending. Stability in economic growth above 5 per cent and controlled inflation also serve as benchmarks.
The pattern of budget absorption throughout the year is also an important factor. Low absorption without increased output risks pressuring economic growth.
The government is seen as needing to combine efficiency with increased state revenue, outcome-based spending reprioritisation, and credible financing management.
“To counter that pressure, optimal policy space through increased revenue, outcome-based spending reprioritisation, and credible financing management is deemed necessary to be implemented simultaneously with budget efficiency implementation. Without that, efficiency would only serve as a short-term buffer, while the deficit pressure could potentially increase in the second half of the year,” he concluded.