The Indonesian rupiah weakened past IDR 18,100 per U.S. dollar on Monday, extending losses for a second consecutive session as renewed tensions in the Middle East boosted demand for the safe-haven greenback and heightened worries about higher energy costs. Domestically, sentiment deteriorated on signs that economic momentum may have softened in the second quarter and could remain sluggish in the coming months. Consumer confidence declined for a third straight month in June, while retail sales in May recorded their sharpest fall in three years, signaling weaker household spending following increases in non-subsidized fuel prices.
A renewed inversion of Indonesia’s government bond yield curve further underscored concerns about the country’s economic outlook. Even so, losses in the rupiah were partly contained by Bank Indonesia’s cumulative 100 basis points of interest rate hikes between May and June. At the same time, government measures to bolster food supplies and counter the impact of El Niño helped alleviate fears over food inflation.
