Rupiah weakens to Rp17,907 amid US-Iran tensions and trade deficit concerns

The rupiah exchange rate against the US dollar at the close of trading on Tuesday weakened by 56 points, or 0.31 percent, to Rp17,907 per US dollar from the previous close of Rp17,851 per US dollar. Market analyst Ibrahim Assuaibi attributed the rupiah’s depreciation to uncertainty surrounding peace negotiations between Iran and the United States. “Uncertainty over whether the two parties will meet highlights the fragility of the 17 June agreement to halt fighting that has disrupted global oil flows through the Strait of Hormuz,” he said in a written statement in Jakarta on Tuesday. Markets are awaiting the outcome of potential US-Iran talks in Qatar amid weekend missile attacks from both sides, which have prevented the ceasefire from holding. However, Iranian Foreign Ministry spokesman Esmaeil Baghaei stated there would be no negotiations with the American side at any level in the coming days. Additional sentiment came from growing conviction that the Federal Reserve will raise interest rates at least once this year. Domestically, markets are anticipating May trade balance data, with a shrinking trade surplus seen as potentially pressuring the current account deficit if not balanced by foreign capital inflows. The Jakarta Interbank Spot Dollar Rate (JISDOR) set by Bank Indonesia also weakened today to Rp17,899 per US dollar from the previous Rp17,856 per US dollar.