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Rupiah Holds Familiar Range After Bank Indonesia Keeps Key Rate Unchanged

IDR

The rupiah holds yesterday's range after Bank Indonesia chose to stand pat on the 7-Day Reverse Repo Rate on Tuesday, while raising the reserve requirement rate.

  • Most economists expected Bank Indonesia to keep the main interest rate unchanged, although some called for a hike after some regional peers started their tightening cycles.
  • We sided with the stand-pat camp, citing recent rhetoric from Bank Indonesia officials to argue that continued withdrawal of liquidity would be preferred over a pre-emptive hike to the key 7-Day Reverse Repo Rate.
  • Governor Warjiyo noted that Bank Indonesia decided to raise the RRR for banks to 9% in September, rather than the previously announced 6.5%, which is expected to reduce liquidity in the system by a further IDR110tn.
  • Spot USD/IDR trades -5 figs at IDR14,653, with bears looking for a fall towards May 11 low of IDR14,525. Bulls need a break above May 19 high of IDR14,738 to see the resumption of the uptrend.
  • USD/IDR 1-month NDF last +8 figs at IDR14,665. Bulls look for a rally above May 19 high of IDR14,758 & May 16 high of IDR14,772. Bears need a slide through May 23 low of IDR14,621 towards May 11 low of IDR14,516.
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The rupiah holds yesterday's range after Bank Indonesia chose to stand pat on the 7-Day Reverse Repo Rate on Tuesday, while raising the reserve requirement rate.

  • Most economists expected Bank Indonesia to keep the main interest rate unchanged, although some called for a hike after some regional peers started their tightening cycles.
  • We sided with the stand-pat camp, citing recent rhetoric from Bank Indonesia officials to argue that continued withdrawal of liquidity would be preferred over a pre-emptive hike to the key 7-Day Reverse Repo Rate.
  • Governor Warjiyo noted that Bank Indonesia decided to raise the RRR for banks to 9% in September, rather than the previously announced 6.5%, which is expected to reduce liquidity in the system by a further IDR110tn.
  • Spot USD/IDR trades -5 figs at IDR14,653, with bears looking for a fall towards May 11 low of IDR14,525. Bulls need a break above May 19 high of IDR14,738 to see the resumption of the uptrend.
  • USD/IDR 1-month NDF last +8 figs at IDR14,665. Bulls look for a rally above May 19 high of IDR14,758 & May 16 high of IDR14,772. Bears need a slide through May 23 low of IDR14,621 towards May 11 low of IDR14,516.