IDR Vulnerable Amid BI Angst

USD/IDR has extended gains, consolidating above its 100-DMA, as overnight impetus (i.e. demand for USD) coupled with continued angst surrounding plans to revamp Bank Indonesia legislation have lent support to the pair.

• To recap, a draft bill presented to a parliamentary committee on Monday by a group of experts included a number of proposals, which would expand Bank Indonesia's mandate and reduce its independence from the government. Although some of the proposed measures are a norm in other countries and the final shape of the bill is yet to be determined, plans to revamp the central bank unnerved investors.
• Broader context has helped amplify these concerns, with investors bearing in mind the deal re: debt monetisation struck recently by the government and Bank Indonesia.
• S&P Asia-Pac Chief Economist criticised the way Indonesia communicates its plans on Bank Indonesia reform, noting that Jakarta should be clearer and more transparent in outlining problems with existing arrangements and ways to address them. His comments came after Moody's expressed concerns over the draft bill on Tuesday.
• Meanwhile, after hours on Wednesday BI Dep Gov Waluyo said that the central bank sees inflation accelerate in the second half of the year. Prices should continue rising next year, per Waluyo.
• Spot USD/IDR sits +55 pips at IDR14,800 as we type. The high of Aug 18 at IDR14,875 provides the initial bullish target and a break above that level would bring the 15,000 figure into view. Bears look for a pullback under Aug 31 low of IDR14,505. Such a move would shift their focus to Jul 29 & 30 lows, both at IDR14,455.