MUFG’s Lloyd Chan has highlighted ongoing vulnerability in the Indonesian rupiah, as the USD/IDR exchange rate moved back above the 18,000 mark, rising 0.5% yesterday, and leading regional currency losses [1]. The renewed geopolitical tensions in the Middle East and elevated US yields are cited as key external pressures weighing on the rupiah [1]. Despite attractive government bond and SRBI yields that have supported foreign inflows into Indonesia's bond market, persistent net foreign equity outflows continue to undermine the currency [1]. MUFG maintains a cautious stance on selective regional currencies, with particular concern for the Indonesian rupiah, and notes that the overall balance of risks remains tilted toward further rupiah weakness [1].
CONCLUSION
The Indonesian rupiah remains under pressure due to external factors such as Middle East tensions and high US yields, despite some support from bond inflows. Persistent foreign equity outflows and a cautious outlook from MUFG suggest further weakness is likely. Market participants should remain alert to ongoing risks affecting the currency.