Potential Rupiah Continues To Experience Weakening Due To Israel-Iran Conflict Heats Up

The rupiah is predicted to continue to weaken. (photo: Bank Indonesia)

JAKARTA - The United States (US) dollar index was at level 106 on Friday, April 12, 2024, which was the highest level since early November 2023. The strengthening of the US dollar was also due to geopolitical tensions that occurred in the Middle East plus expectations that the Fed would maintain higher interest rates for a longer time.

Profit Director of Forexindo Berjangka, Ibrahim Assuaibi said strengthening the US dollar index was one of the causes of the weakening rupiah exchange rate plus the Eid holiday period for more than a week was one of the factors that weakened the movement of the rupiah against the US dollar.

"During such a long period of leave, almost 8 days have made the dollar index continue to experience significant strengthening, so that the rupiah in international trade continues to weaken," he said via voicemail, quoted Monday, April 15.

According to Ibrahim, the weakening of the rupiah in the international market is because Bank Indonesia (BI) has not been able to intervene, coupled with domestic economic data that cannot be released because it coincides with the Eid al-Fitr holiday.

"So it is natural that the rupiah continues to weaken above Rp. 16,000 per US dollar," he said.

Ibrahim said that in this way, the rupiah will most likely be opened lower in trading on Tuesday, April 16 after the long holiday.

According to Ibrahim, another factor in weakening the rupiah in the international market is due to high geopolitical tension in the Middle East. This condition also resulted in rising prices of gold and oil.

Ibrahim said that the recent attack from Iran on Israel on Sunday, April 14, was completely unexpected even though many suspected Iran would attack Israel through third parties such as Hezbollah Iraq, Houwti, and Hamas.

Therefore, Ibrahim said that geopolitical tensions in the middle east are expected to cause other exchange rates, including the rupiah, to weaken.

Ibrahim said that with high geopolitical tension in the Middle East, gold prices would continue to strengthen.

Ibrahim said the gold price target for now is at the level of 2,350 United States (US) dollars per troy ounce. However, the price of gold can rise even higher by touching the level of 2,400 US dollars per troy ounce.

However, Ibrahim believes the $2,400 per troy ounce level will not be achieved by the end of the year, even though the American central bank is lowering interest rates.

Ibrahim said that not only will world gold prices increase but world crude oil prices will also rise sharper due to an open war, not to mention there are retaliatory attacks from Israel involving America, Russia, and China.

"This will make oil refineries in the Middle East slightly less in production," said Ibrahim.

Ibrahim said that if that happened, the world's oil supply would decrease and result in prices continuing to rise as demand increases.

Therefore, Ibrahim saw fear that Israel was eyeing oil refineries in Iran. Thus, production needs for the fulfillment of OPEC member states will decline.

"This makes crude oil prices boil and may touch at the level of 100 US dollars per barrel in 2024," said Ibrahim.