Indonesian Rupiah remains stronger on strong domestic GDP

The Indonesian Rupiah strengthened as the nation's economic growth outpaced forecasts, reaching 5.29% year-on-year in Q2 2026. This surpassed expectations of 5.1%, marking a notable improvement from the 5.61% growth seen in Q1 2026, which was the strongest annual expansion since Q3 2022. On a quarterly basis, Indonesia's economy surged 3.73%, up from a 0.77% decline in the previous quarter, and surpassed market projections of 3.5%. This represents the country's most robust quarterly growth since Q2 2025.

Meanwhile, the US Dollar (USD) weakened, with safe-haven demand retreating due to diplomatic progress on global energy transit routes. The US, Iran, and Oman are reportedly close to an interim agreement to reopen the Strait of Hormuz, with US officials planning an official announcement on Wednesday. This deal would establish a 60-day temporary arrangement between Oman and Iran, addressing a critical maritime chokepoint that handles around 20% of the world's energy supply and could be extended further.

Rabobank's Jane Foley noted that the geopolitical backdrop has also dampened the greenback's defensive appeal, explaining that safe-haven demand has been diminished following President Trump's recent decision to halt additional military action against Iran, hoping for a diplomatic resolution. This move has likely reduced the appeal for investors seeking a safe-haven currency.

USD was the weakest against the Swiss Franc in today's trading, reflecting the overall trend of the US Dollar's decline. Forex Analyst Akhtar Faruqui from New Delhi emphasized the significance of the USD's weakened position, highlighting the impact of geopolitical developments on currency markets.