Jakarta. Rupiah extended its slide on Tuesday as escalating Middle East tensions and cautious global sentiment kept pressure on emerging market currencies.

The Indonesian rupiah (IDR) weakened by 22 points to close at Rp 17,127 per US dollar on April 14, from the previous Rp 17,105, after briefly dropping as much as 50 points during the session. Earlier in the day, Bloomberg data showed the rupiah had already depreciated by 24 points, or 0.14%, to Rp 17,129 against the greenback.

Ibrahim Assuaibi, Director of Traze Andalan Futures, said the rupiah remained under pressure amid geopolitical tensions between the United States and Iran. However, early signals of potential dialogue between the two countries have somewhat eased fears over supply disruptions stemming from a possible US blockade of the Strait of Hormuz.

Previously, the rupiah had weakened after the US military announced plans to expand its blockade of the strategic waterway eastward toward the Gulf of Oman and the Arabian Sea. In response, Iran threatened to target ports in countries bordering the Gulf following the collapse of weekend talks in Pakistan.

“The International Monetary Fund (IMF), the World Bank, and the International Energy Agency (IEA) have urged countries to avoid hoarding energy supplies or imposing export restrictions amid what they describe as the most significant shock ever seen in global energy markets,” Ibrahim said on Tuesday.

He added that the rupiah was also weighed down by a wait-and-see stance in global markets.

“Heightened global uncertainty has pushed businesses into a wait-and-see phase, particularly due to escalating tensions in the Middle East and stalled negotiations between the US and Iran. Declining expectations for business activity and stagnant sales reflect caution among companies in making expansion decisions. That said, business expansion has not stopped, but rather adjusted in strategy,” he explained.

Looking ahead, Ibrahim expects the rupiah to move within a volatile range on Wednesday.

“For tomorrow’s trading, the rupiah is expected to fluctuate but close weaker in the range of Rp 17,120 to Rp 17,170,” he said.

In a separate statement, Bank Permata Chief Economist Josua Pardede said the rupiah’s outlook for the week remains under pressure as the failure of US-Iran peace talks has pushed markets back into risk-off mode.

“The direction is quite clear: the US dollar is once again being sought as a safe-haven asset, oil prices are likely to rise further, and currencies of energy-importing countries in Asia will be more vulnerable. Even after the talks failed, the most immediate reaction in the short term is likely to be higher oil prices, a stronger US dollar, and continued pressure on risk assets, although the magnitude of volatility will depend on whether markets see this as a temporary setback or a sign of a more prolonged escalation,” he added.

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