Bank Indonesia's decision to hike.........>

INDONESIA: Bank Indonesia's decision to hike interest rates by another 25bps on

Wednesday has caused the IDR rally to extend further, with USDIDR hitting a

1-month low at 13,895 at the time of writing. The hike marked the second in just

two weeks and Governor Perry Warjiyo signaled even more hikes could come as

policymakers seek to contain capital outflows amid an emerging market sell-off.

- The board of governors lifted the key rate by 25 basis points to 4.75% and

stressed that IDR stability was a near-term priority. The rupiah has been the

best performing currency in the world over the past week, with the exception of

the Turkish lira. 

- Both 2-year and 10-year government bond yields have declined in the face of

interest rate hikes as investors see the tightening as a temporary measure that

will successfully bring down medium- and long-term inflation expectations. The

10-year bond yield currently sits at 7.03%, down 60bps from this time last week.