The Indonesian rupiah strengthened against the US dollar on Thursday, trading at Rp17,911 per dollar, a gain of 22 points or 0.12 percent from the previous close of Rp17,933.
The move marks a continued recovery for the currency, which had faced pressure earlier in the week amid broader dollar strength fueled by Middle East tensions.
Market participants are citing growing optimism surrounding a potential diplomatic breakthrough in the Strait of Hormuz as a key driver.
Reports indicate that Iran and Oman are nearing a final agreement on the critical waterway, with US President Donald Trump signaling an imminent resolution.
This development has helped alleviate fears of prolonged supply chain disruptions and sustained energy cost spikes that had previously weighed on emerging market currencies.
Domestic fundamentals also provided support.