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🇮🇩 Indonesia /Economy & Trade

Rupiah Weakens as US Threatens to Expand Blockade to Gulf of Oman

From Tempo · (2d ago) Indonesian Critical tone

Translated from Indonesian, summarized and contextualized by DistantNews.

TLDR

  • The Indonesian rupiah weakened by 0.13% against the US dollar, closing at Rp17,127 per dollar on Tuesday.
  • The weakening is attributed to the US threat to extend its blockade of the Strait of Hormuz to the Gulf of Oman and the Arabian Sea.
  • Despite the blockade, potential US-Iran dialogue has somewhat alleviated supply risk concerns, though the rupiah's decline reflects broader geopolitical tensions.

Jakarta – The Indonesian rupiah experienced a notable weakening against the US dollar on Tuesday, closing at Rp17,127 per dollar, a depreciation of 0.13 percent. This movement on the foreign exchange market is directly linked to escalating geopolitical tensions in the Middle East, specifically the US threat to expand its naval blockade to include the Gulf of Oman and the Arabian Sea. Such actions in a critical global shipping lane invariably create uncertainty and impact markets worldwide, including our own.

The U.S. military said on Monday (April 13) that its blockade of the Strait of Hormuz would extend eastward to the Gulf of Oman and the Arabian Sea, while ship tracking data showed two vessels turning back in the strait as the blockade took effect.

— Ibrahim AssuaibiExplaining the immediate trigger for the rupiah's weakening based on US military actions.

According to currency observer Ibrahim Assuaibi, the US military's announcement on Monday regarding the blockade's eastward extension, coupled with reports of vessels turning back, has injected significant concern into global trade routes. The Strait of Hormuz is a vital artery for oil transport, and any disruption or perceived threat to its security reverberates through international commerce. This situation underscores the interconnectedness of global events and their direct influence on Indonesia's economic stability, as reflected in the rupiah's performance.

The U.S. Central Command (CENTCOM) began blockading the strategic maritime route on Monday, April 13, after negotiations between Washington and Tehran failed to establish a ceasefire.

— Ibrahim AssuaibiProviding details on the commencement and context of the US blockade.

While the prospect of ongoing US-Iran dialogue, as confirmed by Pakistani Prime Minister Shehbaz Sharif, offers a glimmer of hope in de-escalating the crisis and potentially easing supply risk worries, the immediate impact on the rupiah remains. The Jakarta Interbank Spot Dollar Rate (JISDOR) also reflected this trend, weakening from Rp17,122 to Rp17,135 per US dollar. This volatility serves as a stark reminder of how susceptible emerging market currencies like the rupiah are to geopolitical shocks originating far from our shores.

In response, Iran threatened to target ports in countries bordering the Gulf after the collapse of weekend talks in Islamabad aimed at resolving the crisis.

— Ibrahim AssuaibiHighlighting Iran's reaction to the US blockade and the failed diplomatic efforts.
DistantNews Editorial

Originally published by Tempo in Indonesian. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

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