The Indonesian rupiah continues to display significant volatility against the U.S. dollar amid shifting global outlooks driven by escalating geopolitical tensions in the Middle East.

According to Refinitiv data, the rupiah weakened notably on Thursday (June 19, 2025), dropping 0.58% to IDR 16,390 per U.S. dollar. This marks the steepest daily decline in about a month, following a period of stability where the rupiah hovered around IDR 16,200 per dollar.

From a technical perspective, the rupiah faces renewed resistance due to an unfilled gap-up, which now serves as the nearest resistance level at IDR 16,510 per U.S. dollar. On the other hand, the support level to watch is at IDR 16,210, based on the horizontal line from the low of the May 23, 2025 candle and coinciding with the daily 200-day moving average (MA200).

Several analysts attribute the rupiah’s continued volatility to predominantly global factors.

Barra Kukuh Mamia, Senior Economist at BCA, stated that the current market conditions are heavily influenced by ongoing uncertainties surrounding the Israel-Iran conflict and the Federal Reserve's recent decision to maintain interest rates unchanged.

He believes that the tailwinds previously supporting the rupiah — which also hinted at the potential for Bank Indonesia to lower interest rates — are only temporary.

Similarly, Andry Asmoro, Chief Economist at Bank Mandiri, explained that global sentiment, particularly stemming from the Israel-Iran war, has prompted investors to return to safe haven assets such as the U.S. dollar and gold. This shift has also contributed to the recent increase in the U.S. Dollar Index (DXY).

On June 17, the greenback experienced a strong daily gain of 0.70%, pushing it above the 98 level. The next day saw another increase, albeit a modest 0.03%.

However, yesterday, the DXY slipped slightly by 0.07%. Unless there is a more substantial decline in the dollar, the rupiah could continue to face headwinds from the strengthening greenback.

Rully Wisnubroto, Chief Economist & Head of Research at Mirae Asset Sekuritas Indonesia, also noted that the shift in market sentiment toward a risk-off mode was mainly driven by geopolitical unrest.

“There is a clear risk-off sentiment due to geopolitical factors, and this has led to widespread weakness in the equity market,” he said.

Hosianna Evalita Situmorang, Economist at Bank Danamon Indonesia, agreed, pointing out that the weakening of the rupiah coincided with a drop in the Jakarta Composite Index (JCI), partly driven by profit-taking after a recent rally. The fall also followed dividend distributions and was influenced by deteriorating global conditions, especially geopolitical developments.

For reference, the JCI fell nearly 2% yesterday, dragging the index below the 7000 level once again. This broad market decline was fueled by foreign investor outflows amounting to IDR 1.25 trillion.