The Indonesian rupiah weakened to around IDR 18,000 per U.S. dollar on Wednesday, erasing gains from the previous session as a stronger greenback and renewed safe-haven demand pressured emerging market currencies. The risk-off mood followed reports that the U.S. carried out fresh airstrikes on Iran in response to vessel attacks in the Strait of Hormuz.
On the domestic front, sentiment deteriorated after new data showed consumer confidence fell for a second straight month in June, dropping to its lowest level since last September as households struggled with persistently high food prices and rising fuel costs. Investor concerns over potential foreign outflows also resurfaced after S&P Dow Jones Indices placed Indonesia on watch for a possible downgrade to frontier market status, mirroring a similar move by MSCI in May.
Risk appetite was further dampened by signs of weakening economic momentum, including a widening budget deficit in the first half of 2026, factory activity contracting in June, and the largest wave of layoffs since 2025. Even so, the rupiah’s losses were partially limited by a modest increase in June foreign exchange reserves, following a drop to a near two-year low in May.
