Jakarta. Rupiah weakened past Rp 17,400 per dollar on Monday as escalating Middle East tensions and increasing demand for safe-haven assets pressured emerging-market currencies, while investors also braced for key US inflation data later this week.

Rupiah closed down 32 points at Rp 17,414 per US dollar on Monday, after earlier falling as much as 45 points from the previous close of Rp 17,382.

According to Ibrahim Assuaibi, director at Traze Andalan Futures, the currency came under pressure as peace negotiations between the United States and Iran failed to reach a final agreement.

“US President Donald Trump said Iran’s response to the US peace proposal was unacceptable, raising geopolitical risks,” Ibrahim said on Monday.

The remarks dampened expectations for a near-term easing of tensions in the Gulf region.

Iran’s response, reportedly delivered through Pakistani mediators, included demands for sanctions relief, the withdrawal of US naval forces near the Strait of Hormuz, security guarantees, and recognition of Iran’s right to continue certain nuclear activities.

“Investors remain focused on the Strait of Hormuz, much of which has remained effectively closed since the conflict began,” Ibrahim said.

The rupiah also weakened ahead of Trump’s scheduled visit to China later this week, where he is expected to meet Chinese President Xi Jinping in Beijing. The meeting is expected to center on trade, Taiwan, and the Iran conflict.

“Market attention is also focused on the release of April US inflation data, including the Consumer Price Index (CPI) and Producer Price Index (PPI),” Ibrahim added.

Separately, academics warned that the rupiah’s depreciation could eventually push up prices of essential goods, transportation, and energy as import costs rise.

Rijadh Djatu Winardi, an academic at the Faculty of Economics and Business of Universitas Gadjah Mada, described the current rupiah weakness as the result of a “perfect storm” of global and domestic pressures.

He said rising geopolitical tensions had driven investors toward the US dollar as a safe-haven asset, while domestic seasonal and structural factors, including foreign exchange demand for dividend payments to overseas investors, had intensified pressure on the currency.

“The combination of global and domestic pressures is what makes the rupiah’s depreciation feel more severe,” Rijadh said on Sunday.

With the rupiah hovering around Rp 17,400 per dollar, he warned of rising imported inflation due to higher costs of imported goods in rupiah terms.

Companies that still rely heavily on imported raw materials are likely to face rising production costs, although consumers may only begin to feel the impact over the coming months.

“People will gradually feel the impact through higher food prices, rising transportation costs, and more expensive healthcare products,” he said.

Rijadh added that the weaker rupiah also placed pressure on the state budget, particularly through higher energy subsidy costs and external debt payments.

“When fiscal space is absorbed by subsidies and debt obligations, the government’s flexibility to finance sectors such as education, healthcare, and social protection becomes more limited,” he said.

He said that Bank Indonesia now faces a difficult balancing act between maintaining exchange-rate stability and supporting economic growth.

According to Rijadh, keeping interest rates low remains important to support domestic economic activity, but rupiah stability must also be preserved.

He said a combination of foreign exchange market intervention and the use of debt instruments to attract capital inflows was a reasonable approach.

“This approach is fairly rational because it seeks to maintain a balance between macroeconomic stability and domestic growth momentum,” he said.

Rijadh also stressed the importance of maintaining fiscal credibility through disciplined government spending while strengthening domestic industries to reduce reliance on imported food and energy.

He added that the rupiah’s weakness could also become an opportunity to boost Indonesia’s exports.

“Equally important is protecting vulnerable communities. Social protection programs must remain strong and adaptive because lower-income groups are usually the first to feel the impact of rising prices,” he concluded.

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