Grace el Dora, Jakarta – The Indonesian rupiah could potentially reach Rp 16,000 per US dollar as geopolitical tensions and a stronger greenback continue to pressure the local currency.

The rupiah depreciated 43 points, or 0.27 percent, to Rp 15,914 per US dollar, down from Rp 15,871.

Currency analyst Brahmantya Himawan of Finex attributes the rupiah's weakness to the escalating Russia-Ukraine conflict, with the US dollar benefiting as a safe-haven currency.

"Demand for the US dollar has increased as it is seen as a safe-haven currency, especially with the recent escalation in the Russia-Ukraine conflict and Russian President Vladimir Putin's remarks on nuclear weapons," Brahmantya said in Jakarta on Thursday.

Putin recently lowered the threshold for using nuclear weapons, suggesting that Russia could respond with a nuclear attack to any conventional strike from a country backed by nuclear powers. That could potentially include Ukrainian attacks backed by the US.

Brahmantya added that geopolitical tensions have driven up the US dollar, which tends to gain strength during global instability.

Additionally, economic policies from the US, particularly those tied to former President Donald Trump's second term, have contributed to a stronger dollar, further pressuring the rupiah.

Brahmantya predicts the rupiah could fluctuate between Rp 15,900 and Rp 16,100 per US dollar today.

On the domestic front, Bank Indonesia (BI) has kept its benchmark interest rate at 6 percent during its Nov. 19-20, 2024 board of governors meeting to help stabilize the rupiah.

President Prabowo Subianto's agricultural downstream program could also help strengthen the rupiah by boosting exports of six key agricultural commodities: coconut, cloves, palm oil, pepper, cocoa, and coffee, all of which have significant growth potential.

"Indonesia has a huge export opportunity, and downstream is expected to add value at least 20 times. This added value could help strengthen the rupiah against the US dollar and lower the exchange rate," Brahmantya concluded.

Source: https://jakartaglobe.id/business/rupiah-could-reach-rp-16000-as-global-tensions-drive-dollar-u