Jakarta. Rupiah closed weaker on Thursday, sliding closer to the Rp 18,000-per-dollar mark as concerns over Indonesia’s widening fiscal deficit outlook, escalating tensions in the Middle East, and persistent US inflation weighed on investor sentiment.

The rupiah depreciated by 44 points to Rp 17,988 per US dollar in afternoon trading, compared with the previous close of Rp 17,944.

Ibrahim Assuaibi, Director of Traze Andalan Futures, said pressure on the rupiah intensified after the Organization for Economic Cooperation and Development (OECD) projected Indonesia’s 2026 state budget deficit could widen to the fiscal rule ceiling of 3% of gross domestic product (GDP).

External factors also continued to weigh on the currency. Ibrahim noted that geopolitical tensions in the Middle East remained elevated after Iran’s military announced the closure of the Strait of Hormuz to oil tankers and commercial vessels.

“Iran’s prolonged blockade of the strait, through which around one-fifth of global oil and gas shipments normally pass, has kept oil prices elevated,” Ibrahim said in a statement on Thursday.

The rupiah also came under pressure after US consumer prices rose 4.2% in May from a year earlier, marking the fastest pace of inflation in three years and largely driven by higher energy costs.

“The inflation report reinforces market expectations that the Federal Reserve will keep interest rates higher for longer and could even resume monetary tightening later this year if price pressures persist,” Ibrahim said.

He added that investors are now awaiting US producer price data due later on Thursday for further clues on the inflation outlook and the future path of Federal Reserve policy.

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