Rupiah Slumps on Strait of Hormuz Tensions and Fed Rate Hike Fears
The Indonesian rupiah weakened to Rp 17,897 against the US dollar on Friday, following escalating tensions in the Strait of Hormuz.
Traze Andalan Futures director Ibrahim Assuaibi attributed the decline to uncertainty over the conflict involving the United States and Iran, which has raised concerns about a potential surge in crude oil prices.
The rupiah fell 34 points from its previous close of Rp 17,863 per dollar. Markets are now pricing in around a 60% chance of a September rate hike by the Federal Reserve, following a Financial Times report that Chair Kevin Warsh is prepared to raise borrowing costs if inflation remains elevated.
The rupiah's weakness contrasts with Indonesia's relatively stable foreign exchange reserves, which stood at $145.3 billion at the end of July.