Bank Indonesia Boosts Efforts To Mop Up Liquidity But Stands Pat On Policy Rate

The rupiah went offered as Bank Indonesia kept its 7-Day Reverse Repo Rate unchanged at the record low of 3.50% on Thursday, disappointing those market participants with a more hawkish orientation.

• We were siding with 22 out of 36 economists surveyed by Bloomberg who expected Bank Indonesia to keep the key policy rate unchanged. But the remaining 14 analysts called for a 25bp rate hike amid clear indications that pressure is mounting on the Board of Governors to act.
• The rationale for keeping the key rate unchanged echoed the Bank's familiar views on the need to strike a balance between fighting inflation and downside risks to growth. The Bank upgraded its inflation forecasts, but saw core price growth remaining within the target range.
• In a subsequent call with investors, Governor Warjiyo said the central bank will sell off ~IDR70tn of short-term government bonds to accelerate the absorption of excess liquidity, before moving on to offloading 5- to 10-year bonds.
• Spot USD/IDR last trades at IDR15,030, little changed on the day. The next layer of resistance is provided by May 5, 2020 high of IDR15,138. Bears look for a dip through Jul 18 low of IDR14,955.
• USD/IDR 1-month NDF last seen -27 figs at IDR15,080. Bears look for a slide through Jul 8 low of IDR14,966, while bulls eye a jump towards Jul 15 high of IDR15,190.
• MYR/IDR changes hands at IDR3,372, barely changed on the day. The next key resistance level has been defined at IDR3,400. Conversely, bears look for a plunge under Jul 19/Jun 27 lows of IDR3,359/3,358.
• SGD/IDR trades at IDR10,8078, up ~28 figs on the day after printing fresh cycle highs. Gains past May 26, 2021 high of IDR10,830 would reaffirm underlying bullish momentum. Bears need a fall through the 50-DMA/Jul 12 low at IDR10,650/10,636 to get some reprieve.