Rupiah Weakens to Rp17,880 per US Dollar Amid Global Geopolitical and Fiscal Concerns

JAKARTA, Jakartaweekly.com—The rupiah weakened again against the United States dollar in trading on Friday, May 29, 2026, amid a strengthening US dollar index driven by a combination of global geopolitical sentiment, inflationary pressures in the United States, and market concerns over Indonesia’s domestic fiscal condition.

At the close of trading on Friday, May 29, 2026, the rupiah fell by 35 points to Rp17,880 per US dollar from the previous Rp17,845 per US dollar. The Garuda currency had even weakened by as much as 55 points during intraday trading.

Director of PT Traze Andalan Futures as well as an economic, currency, and commodity observer, Ibrahim Assuaibi, said the strengthening of the US dollar was triggered by improving global market sentiment after reports emerged that Washington and Tehran had reached a draft agreement to extend the ceasefire for 60 days.

“The prospect of a peace agreement has reduced concerns over immediate supply shortages and supported hopes that shipping activities through the Strait of Hormuz could gradually return to normal,” Ibrahim said in a statement on Friday, May 29, 2026.

Nevertheless, according to him, traffic in the Strait of Hormuz remains below normal pre-conflict levels, meaning geopolitical risk premiums continue to overshadow the global oil market.

Oil prices themselves have been moving very volatilely in recent sessions as markets responded to developments in ceasefire negotiations between the United States and Iran. Oil prices had strengthened following reports of new military exchanges between the two countries, but those gains later faded again after diplomatic optimism resurfaced.

From the US economic side, markets are also closely watching persistently high inflation data. Personal consumption expenditure (PCE) inflation, which came in above expectations, reinforced expectations that the US central bank, the Federal Reserve, would keep interest rates higher for longer.

In addition, US economic growth in the first quarter of 2026 was recorded as slowing. US gross domestic product (GDP) grew only 1.6 percent, revised down from the previous projection of 2 percent. Meanwhile, initial jobless claims in the US rose to 215,000 for the week ending May 23, higher than the market expectation of 211,000.

Domestically, Ibrahim assessed that the Fed’s policy of maintaining high interest rates had triggered foreign capital outflows from emerging markets, including Indonesia. Investors were said to prefer lower-risk instruments in the US that offer more attractive returns.

He also highlighted market concerns regarding Indonesia’s budget outlook and fiscal deficit, which have drawn attention from global rating agencies such as S&P Global, Moody’s, and Fitch Ratings.

According to Ibrahim, high global oil prices have also increased Indonesia’s energy import costs, thereby driving up demand for US dollars for import payments. This condition has weakened the trade balance surplus and limited the supply of dollars in the domestic market.

“In addition, seasonally high demand for US dollars for corporate needs such as dividend payments and routine imports has also put pressure on the rupiah,” he said.

Pressure on the rupiah, he continued, has also occurred alongside the weakening of the domestic stock and bond markets, influenced by MSCI sentiment, concerns over the fiscal deficit, and rising yields on Indonesian government bonds (SBN).

(Read Jakartaweekly.com news on Google News)