FX.co ★ Rupiah Nears 18,100 on Safe-Haven Demand, Weak Fundamentals

The Indonesian rupiah weakened toward IDR 18,100 per U.S. dollar on Thursday, extending its decline as renewed conflict in the Middle East fueled safe-haven demand for the greenback and reinforced expectations that U.S. interest rates will stay higher for longer. Domestic sentiment also worsened, with Indonesia’s retail sales in May posting their sharpest annual drop in three years, underscoring softer consumer spending after an increase in non-subsidized fuel prices.

At the same time, consumer confidence in June fell to its lowest level since September, indicating that households are becoming more cautious about income prospects, labor-market conditions, and future spending plans. Adding to the headwinds, S&P Dow Jones Indices signaled that Indonesia could be downgraded to frontier-market status in 2027, stoking worries about potential foreign capital outflows.

Even so, the rupiah’s losses were partially limited by easing oil prices, stronger loan growth in May, and faster government budget disbursement, all of which are intended to support economic activity.