The Indonesian rupiah inched lower to around IDR 17,960 per U.S. dollar on Monday, snapping a four-day winning streak as the greenback strengthened amid renewed Middle East tensions. The flare-up pushed oil prices higher, intensifying worries about persistent U.S. inflation and the prospect of interest rates staying elevated for longer.
Domestically, the rise in crude oil prices and reports of fuel shortages in Sumatra heightened concerns over Indonesia’s fiscal pressures, even though budget execution in the first half of 2026 remained broadly on track. The rupiah’s decline was partly limited by government efforts to contain inflation after June’s reading approached the upper end of Bank Indonesia’s 1.5%–3.5% target band, including food price stabilization measures amid El Niño-related risks.
At the same time, investment momentum strengthened, with foreign direct investment inflows in the second quarter recording their fastest increase since late 2024. This underscored Indonesia’s resilience in attracting long-term capital despite global uncertainty. Market participants are now focused on Bank Indonesia’s policy meeting later this week, following a cumulative 100-basis-point rate hike in May and June.
