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Capital Outflows · Indonesia · MSCI · Rupiah
The Indonesian Rupiah (IDR) declined against the US Dollar (USD) to 17,870 after Morgan Stanley Capital International (MSCI) issued a warning regarding market transparency, directly triggering capital flight and complicating the central bank's currency stabilization efforts.
The US Dollar strengthened due to increased safe-haven demand, fueled by renewed concerns over a US-Iran peace deal following President Donald Trump's threat of direct strikes on Iran. This threat dismantled the existing peace framework, despite Vice President JD Vance's recent talks with Iranian officials.
Risk aversion is expected to ease as mediators Qatar and Pakistan announced a joint statement confirming the US and Iran agreed to a formal roadmap for a final peace agreement within 60 days. Additionally, the Greenback receives support from a hawkish Federal Reserve outlook, with 9 out of 19 policymakers projecting at least one interest rate hike this year, and market investors pricing in a potential September increase.
Indonesia anticipates retaining its emerging markets status despite the current challenges.
