Rupiah Weakens as High Oil Prices Pressure Currency

TEMPO.CO, Jakarta - The rupiah exchange rate against the US dollar at the close of trading on Thursday weakened by 38 points, or 0.12 percent, to Rp18,111 per US dollar, compared to the previous close of Rp18,073 per US dollar.

According to Woori Bank analyst Rully Nova, the rupiah's weakening was influenced by high oil prices. "The rupiah weakened in today's trading, influenced by global factors, such as the strengthening dollar index and oil prices remaining at high levels," he said on Thursday, as quoted by ANTARA.

He continued, although the oil price trend is declining, it is still far above the price assumptions in the state budget. This could result in fiscal and trade deficits.

Another sentiment stemmed from the Federal Open Market Committee (FOMC) meeting, which indicated a hawkish stance by the Federal Reserve (the Fed). This led to an increase in government bond yields. The 10-year yield rose by 0.5 basis points (bps), while the 2-, 3-, and 6-year yields rose by 1.2, 1.4, and 2.6 bps, respectively.

"The 6-year tenor saw the largest increase, 14 bps, even though there was no capital outflow," he said.

Similarly, Permata Bank Chief Economist Josua Pardede predicted that the rupiah would fluctuate within a limited range after the U.S. FOMC announced its monetary policy.

"In line with market expectations, the Fed maintained the Fed Funds Rate (FFR) at 3.50-3.75 percent at its July 2026 meeting and reaffirmed its commitment to restoring price stability," he said.

In a post-meeting press conference, he continued, Fed Chairman Kevin Warsh said the U.S. central bank continues to monitor the upward trend in U.S. Treasury (UST) yields, which indicates that bond investors have implemented some of the efforts to tighten financial conditions that the central bank hopes for.

This statement lowered market expectations of a potential interest rate increase in the near future while pushing up UST yields on long-term maturities.

Meanwhile, Bank Indonesia's Jakarta Interbank Spot Dollar Rate (JISDOR) strengthened today to Rp18,078 per US dollar from Rp18,087 previously.

Read: Rupiah Weakens as Markets Eye BI Policy Direction

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