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TD Securities Recommend Short USD/IDR Position

IDR

Wednesday saw TD Securities issue a recommendation to short USD/IDR. The trade came with an entry point of IDR14,872 (3-month NDF reference IDR14,922), with a target of IDR14,057 and a stop loss set at IDR15,279.

  • They note that “Indonesia is finally seeing a return of flows into both its bond and equity markets, marking a significant reversal from the previous weak trend. Additionally, Indonesian government bonds offer a relatively higher excess bond yield (stripping out U.S. Tst yields and hedging costs) than others in the region. Indonesia's terms of trade have looked increasingly attractive over recent months, offering support to its current account position and the IDR. News that China has pledged to increase palm oil imports from Indonesia is another factor that will help on this front while Indonesia's current account registers positive seasonality in Q3. We think BI will continue to defend the USD/IDR IDR15,000 level, which will act as a strong line in the sand. Relatively higher real policy rates than other countries in Asia also offers the IDR more protection and we also see a strong chance that BI hikes this month, with the Bank shifting its stance towards a less accommodative one.
  • When it comes to technical TD noted that the “USD/IDR MACD differential has turned negative and the currency pair has broken below its 50% Fibonacci retracement level.”
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Wednesday saw TD Securities issue a recommendation to short USD/IDR. The trade came with an entry point of IDR14,872 (3-month NDF reference IDR14,922), with a target of IDR14,057 and a stop loss set at IDR15,279.

  • They note that “Indonesia is finally seeing a return of flows into both its bond and equity markets, marking a significant reversal from the previous weak trend. Additionally, Indonesian government bonds offer a relatively higher excess bond yield (stripping out U.S. Tst yields and hedging costs) than others in the region. Indonesia's terms of trade have looked increasingly attractive over recent months, offering support to its current account position and the IDR. News that China has pledged to increase palm oil imports from Indonesia is another factor that will help on this front while Indonesia's current account registers positive seasonality in Q3. We think BI will continue to defend the USD/IDR IDR15,000 level, which will act as a strong line in the sand. Relatively higher real policy rates than other countries in Asia also offers the IDR more protection and we also see a strong chance that BI hikes this month, with the Bank shifting its stance towards a less accommodative one.
  • When it comes to technical TD noted that the “USD/IDR MACD differential has turned negative and the currency pair has broken below its 50% Fibonacci retracement level.”