Indonesian Rupiah: BI tightening to cushion IDR against US Dollar – MUFG

MUFG’s Lloyd Chan notes that Indonesian Rupiah (IDR) has been supported by Bank Indonesia’s proactive tightening and FX measures, but elevated US yields and domestic policy uncertainty are testing this buffer. Chan expects Bank Indonesia (BI) to hike to 6.25% by year-end, providing a stronger cushion and slowing the pace of Rupiah depreciation against the Dollar.

Rupiah support from further BI hikes

"The rupiah has been supported by Bank Indonesia’s recent proactive policy tightening and FX support measures, but elevated US yields and domestic policy uncertainty around the government’s commodity export control plan are testing this buffer."

"In addition, MSCI has deferred its decision on Indonesian’s equity market classification till November."

"We expect further BI tightening to 6.25% by year-end to provide stronger cushion for the rupiah, helping to slow the pace of rupiah depreciation against the dollar."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)