Jakarta. Rupiah closed weaker against the US dollar on Thursday, sliding despite a softer greenback, as domestic concerns overshadowed relatively limited external pressures.

Bloomberg spot exchange data showed the rupiah fell 33 points, or 0.2%, to Rp 16,755 per dollar. In contrast, the US dollar index slipped 0.27% to 96.18.

The currency had strengthened a day earlier, gaining 46 points to close at Rp 16,722 on Wednesday.

Ibrahim Assuaibi, director at Traze Andalan Futures, said the rupiah’s decline was largely driven by negative domestic sentiment, particularly investor unease over the outlook for Indonesia’s financial markets.

“One of the main factors is market concern following Goldman Sachs Group Inc’s decision to downgrade Indonesian equities to underweight,” Ibrahim wrote in a research note on Thursday.

Goldman Sachs Group Inc has warned that concerns raised by MSCI Inc over Indonesia’s investment eligibility could trigger sizable foreign outflows. In a worst-case scenario, if Indonesia were reclassified from an emerging market to a frontier market, passive funds tracking MSCI indices could offload assets worth up to $7.8 billion.

Additional outflows of around $5.6 billion could also materialize should FTSE Russell review its methodology and reassess Indonesia’s free-float status, Ibrahim said.

“The combination of market pressure and liquidity downgrade risks could force portfolio adjustments by long-only investors, while also encouraging speculative flows from hedge funds,” he added.

Pressure on domestic assets intensified after Indonesian stocks plunged 7.4% on Wednesday, following MSCI’s announcement to delay index changes while awaiting regulators’ resolution of concerns over highly concentrated share ownership at several listed firms.

“Low free float levels in the market have become a key concern for global investors,” Ibrahim said.

From the global front, market sentiment was also clouded by geopolitical tensions, after US President Donald Trump was reported to be considering further military action against Iran. Meanwhile, the Federal Reserve kept its benchmark interest rate unchanged at 3.50%–3.75%, reiterating that future policy moves would remain data-dependent.

Ibrahim noted that the rupiah had weakened by as much as 85 points during Thursday’s session before paring losses into the close. For Friday’s trade, he expects the currency to move sideways with a weakening bias in the range of Rp 16,750 to Rp 16,780 per dollar.