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Digesting Hawkish Surprise From Bank Indonesia

IDR

Spot USD/IDR last trades +12 figs at IDR15,029, having recouped opening losses. If yesterday's peak (IDR15,040) gives way, bulls will target May 5, 2020 high of IDR15,138. Bears look for losses towards Sep 12 low/100-DMA at IDR14,818/14,806.

  • USD/IDR 1-month NDF last -3 figs at IDR15,055. Downside focus falls on the 100-DMA at IDR14,835, while bulls seek to force a move through Jul 21 high of IDR15,133.
  • Bank Indonesia raised the 7-Day Reverse Repo Rate by 50bp Thursday, as forecast by just 7 out of 37 economists surveyed by Bloomberg, with the rest expecting a 25bp rate rise. The decision was taken "as a front-loaded, pre-emptive and forward-looking measure to lower inflation expectations and return core inflation to the 3.0%±1% target corridor in the latter half of 2023, while simultaneously strengthening exchange rate stabilisation policy." The second consecutive hawkish surprise coupled with rhetoric emphasising the Bank's forward-looking approach signals determination to crack down on above-forecast inflation, albeit Gov Warjiyo said that "more aggressive rate hikes are not needed in Indonesia."
  • Offshore investors bought a net $55.60mn in local stocks Thursday, while the Jakarta Comp finished ~0.4% higher. The index has slipped this morning and last deals ~0.2% shy of neutral levels.
  • Palm oil futures remain heavy, with the contract for December delivery last MYR73/MT below neutral levels, even as BBG Commodity Index is little changed.
  • Indonesia's economic docket is virtually empty during the next week.
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Spot USD/IDR last trades +12 figs at IDR15,029, having recouped opening losses. If yesterday's peak (IDR15,040) gives way, bulls will target May 5, 2020 high of IDR15,138. Bears look for losses towards Sep 12 low/100-DMA at IDR14,818/14,806.

  • USD/IDR 1-month NDF last -3 figs at IDR15,055. Downside focus falls on the 100-DMA at IDR14,835, while bulls seek to force a move through Jul 21 high of IDR15,133.
  • Bank Indonesia raised the 7-Day Reverse Repo Rate by 50bp Thursday, as forecast by just 7 out of 37 economists surveyed by Bloomberg, with the rest expecting a 25bp rate rise. The decision was taken "as a front-loaded, pre-emptive and forward-looking measure to lower inflation expectations and return core inflation to the 3.0%±1% target corridor in the latter half of 2023, while simultaneously strengthening exchange rate stabilisation policy." The second consecutive hawkish surprise coupled with rhetoric emphasising the Bank's forward-looking approach signals determination to crack down on above-forecast inflation, albeit Gov Warjiyo said that "more aggressive rate hikes are not needed in Indonesia."
  • Offshore investors bought a net $55.60mn in local stocks Thursday, while the Jakarta Comp finished ~0.4% higher. The index has slipped this morning and last deals ~0.2% shy of neutral levels.
  • Palm oil futures remain heavy, with the contract for December delivery last MYR73/MT below neutral levels, even as BBG Commodity Index is little changed.
  • Indonesia's economic docket is virtually empty during the next week.