US-Iran Negotiations Trigger Rupiah Weakening

The rupiah exchange rate weakened at the close of trading on Wednesday (1/7), falling 45 points or 0.25 percent to Rp17,952 per US dollar from the previous Rp17,907 per US dollar. Money market analyst Ibrahim Assuaibi explained that the rupiah’s depreciation was influenced by uncertainty over US-Iran peace negotiations. “Uncertainty over the progress of US-Iran peace negotiations is maintaining geopolitical risk premiums in the market,” he said on Wednesday (1/7). Developments in Qatar are the market’s focus after Iran rejected direct talks with the US. The prospect of a deal on a ceasefire that has been ongoing for two weeks is also in focus. On the other hand, there has been a sharp decline in crude oil prices following the Iran conflict. Brent prices plunged around 38 percent during the second quarter after surging around 94 percent in the first quarter, marking the steepest quarterly decline since the record 66 percent drop in the first quarter of 2020. “The absence of direct talks has reinforced uncertainty about how quickly Washington and Tehran can resolve outstanding issues within their 60-day negotiation framework, including the future of the Strait of Hormuz,” Ibrahim said. The Jakarta Interbank Spot Dollar Rate (JISDOR) of Bank Indonesia on the day also moved weaker to a level of Rp17,961 per US dollar from the previous Rp17,899 per US dollar.