The Indonesian Rupiah (IDR) declined against the US Dollar (USD), with USD/IDR trading around 18,020 during Asian hours on Monday, halting its four-day losing streak. This move was driven by rising crude oil prices and reports of fuel shortages in Sumatra, which have amplified concerns over Indonesia’s fiscal strain. Despite these challenges, Indonesia saw its sharpest rise in foreign direct investment inflows since late 2024 during the second quarter, indicating resilience in attracting long-term capital. However, the upside for USD/IDR may be restrained as the US Dollar continues to lose ground, with the Federal Reserve widely anticipated to keep interest rates steady at its upcoming meeting. Market pricing via the CME FedWatch Tool reflects a 61.4% probability of a rate hike in September. The Greenback could regain strength amid increased risk aversion due to escalating hostilities between the US and Iran, as the US launched its ninth consecutive night of strikes against Iranian targets and Iran declared the ceasefire effectively abandoned, raising the risk of disruptions to energy pathways [1][3].
Gold (XAU/USD) extended its fragile recovery from a monthly low, supported by a softer US Dollar. However, rising geopolitical tensions and expectations of higher US interest rates favor USD bulls, warranting caution for Gold investors. The US completed a ninth straight night of strikes against Iran, with President Trump stating the strikes were in honor of US service members killed recently. Iran responded with ballistic missiles and attack drones targeting US allies, and the US resumed a naval blockade of Iranian ports. The IRGC is restricting vessel traffic through the Strait of Hormuz, lifting crude oil prices to the highest since June 12 and fueling inflation worries. Cleveland Fed President Beth Hammack argued that rates may need to rise to combat persistent inflation, supporting the USD and warranting caution for Gold bulls. The technical setup for Gold remains bearish, with the metal holding below the 200-day SMA near $4,495.79 and just under the channel’s upper boundary around $4,056.51 [3].
Meanwhile, the Australian Dollar (AUD) gained ground against the Japanese Yen (JPY), with AUD/JPY trading near 113.55 during the early European session. The move was attributed to the interest rate differential between the Reserve Bank of Australia (RBA), which held its Official Cash Rate steady at 4.35% at its June policy meeting, and the Bank of Japan (BoJ). The ASX 30-Day Interbank Cash Rate Futures implied a 16% chance of an RBA rate hike in August and a 50% to 60% chance of one more hike by December 2026. Traders remain alert for potential intervention from Japanese authorities, with Finance Minister Satsuki Katayama stating that decisive action could be taken if necessary. The BoJ, after hiking rates to the highest level in three decades in June, is likely to raise rates again before the end of the year but is not expected to move at the July policy meeting [2].
Across all markets, the escalation in geopolitical tensions, particularly between the US and Iran, has increased risk aversion, supporting safe-haven assets like the USD and Gold, while also driving up crude oil prices and impacting currencies of commodity-exporting nations. The ongoing uncertainty and potential for further disruptions in energy supply are contributing to heightened volatility and cautious sentiment among investors [1][3].
CONCLUSION
Geopolitical tensions and rising oil prices have triggered significant volatility across FX and commodity markets, with the Indonesian Rupiah weakening, Gold showing a fragile recovery, and the Australian Dollar gaining against the Yen. Market participants are closely watching central bank actions and geopolitical developments, which are likely to drive further risk aversion and volatility. The outlook remains cautious, with inflation concerns and potential rate hikes influencing investor sentiment.