Indonesian Rupiah: Supported by ratings yet constrained against US Dollar – OCBC

OCBC strategists Sim Moh Siong and Christopher Wong note that S&P’s affirmation of Indonesia’s BBB/A-2 ratings with a stable outlook is mildly supportive for the Indonesian Rupiah (IDR) by removing immediate downgrade risk. However, they caution that IDR gains may be limited without clearer fiscal consolidation and better capital flows, while the recent rebound in Oil prices could weigh via higher import costs, inflation and subsidy burdens. USD/IDR trades near 18,105.

Rating relief but oil caps upside

"IDR may find some relief from S&P’s rating affirmation, but the recent oil spike may still limit the extent of IDR gains."

"S&P’s affirmation of Indonesia’s BBB/A-2 ratings with a stable outlook is mildly supportive for the IDR, as it removes an immediate sovereign downgrade risk and signals that recent fiscal and external strains are temporary and manageable."

"However, the impact may be limited unless this is followed by clearer fiscal consolidation and a sustained improvement in capital flows."

"Elsewhere, the recent rebound in oil prices may also limit IDR gains, given the potential impact on Indonesia’s import bill, inflation and fuel-subsidy costs as well as via the sentiments channel."

"USD/IDR last closed at 18105 levels. Mild bullish momentum on daily chart intact while RSI is near overbought conditions. Resistance at 18190 (previous high). Support at 18000, 17910 (21 DMA)."

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