18.05.202604:36:36UTC+00Rupiah Weakness Deepens After Prabowo Villager Remarks

The Indonesian rupiah weakened to a fresh low of around IDR 17,670 per dollar on Monday, extending its decline for a third consecutive session. The move came as the U.S. dollar index climbed to a six-week high, with inflation concerns tied to the conflict in the Middle East strengthening expectations that the Federal Reserve may raise interest rates later this year.

Domestically, sentiment remained cautious ahead of first-quarter current account data due later this week, following a shift to deficit in the fourth quarter driven by a wider oil trade gap. President Prabowo sought to play down the impact of the currency’s depreciation on rural communities, arguing that villagers are largely insulated because they do not transact in U.S. dollars.

Attention is now turning to Bank Indonesia’s upcoming policy meeting, where some analysts are urging a rate hike to curb capital outflows and support the rupiah. Prabowo has recently criticized Governor Perry Warjiyo over the currency’s slump, even as he signed off on tighter foreign-exchange regulations and liquidity measures.

Indonesian assets were already under pressure before the outbreak of the Iran conflict, amid investor unease over the country’s fiscal outlook, inflation risks, and concerns about market transparency.