Rupiah Weakens to Rp 17,881 as Markets Focus on Oil Prices and Fed Rates

The rupiah closed at Rp 17,881 per US dollar, down 35 points or 0.20% from the previous close of Rp 17,846. Financial market analyst Ibrahim Assuaibi attributed the weakening to highly volatile oil prices.

“Oil prices remain highly volatile in recent sessions as markets react to conflicting headline news surrounding ceasefire negotiations,” he said in a written statement in Jakarta on Friday.

Market sentiment had improved following reports that Washington and Tehran had reached a draft agreement to extend the ceasefire for 60 days, while negotiations on Iran’s nuclear programme and regional security issues continue.

The ceasefire prospects have eased concerns over immediate supply shortages and raised hopes that shipping activity through the Strait of Hormuz could gradually normalise. However, traffic through the strategic waterway remains well below pre-conflict levels, meaning geopolitical risk premiums continue to affect oil markets.

Further sentiment was driven by US economic data, including unexpected inflation and growth figures, which reinforced expectations that the Federal Reserve may keep interest rates higher for longer.

Domestically, the Fed’s decision to maintain high interest rates has triggered capital outflows from emerging markets, including Indonesia.

“Investors are tending to move their assets to lower-risk instruments in the US, such as bonds, which offer more attractive yields,” Ibrahim said.

The Bank Indonesia Jakarta Interbank Spot Dollar Rate (JISDOR) also weakened to Rp 17,883 per US dollar from Rp 17,789 previously.