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USD/IDR Consolidates Ahead Of The BI Decision, Correlations Stronger With US Yields

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USD/IDR spot appears to be consolidating near recent highs the pair last near 16250, little changed for Wednesday's so far. The 1 month NDF is just above 16260, comfortably off recent highs, but also not showing signs of dramatic mean reversion. Note for this pair the 20-day EMA continues to trend higher and was last near 16071.5. Recent highs were marked at 16366.

  • Near term focus rests with tomorrow's BI outcome. No change is expected by the consensus although several sell-side forecasters are expecting a 25bps hike to curb rupiah depreciation pressures.
  • How much a hike curbs IDR weakness remains to be seen. USD/IDR correlations are positive with Indonesian yield movements in the past year at +54% (based off the 10yr yield and using weekly correlations). Intuitively we would expect the opposite to hold, but Indonesian yields are mostly likely following broader US yield direction over this period. USD/IDR correlations with US 10yr yield moves over the past year is around +53%. This suggests US yield shifts will hold move sway on IDR direction.
  • Offshore portfolio flows remain a headwind for IDR. So far this month we have seen just over $800mn in equity outflows, while bond flows have been -$460mn (up until the 19th of April).
  • 5yr CDS is off recent highs, but is comfortably above recent lows.
  • Beyond tomorrow's BI announcement the data calendar is quiet until early May (when CPI and PMIs print).
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USD/IDR spot appears to be consolidating near recent highs the pair last near 16250, little changed for Wednesday's so far. The 1 month NDF is just above 16260, comfortably off recent highs, but also not showing signs of dramatic mean reversion. Note for this pair the 20-day EMA continues to trend higher and was last near 16071.5. Recent highs were marked at 16366.

  • Near term focus rests with tomorrow's BI outcome. No change is expected by the consensus although several sell-side forecasters are expecting a 25bps hike to curb rupiah depreciation pressures.
  • How much a hike curbs IDR weakness remains to be seen. USD/IDR correlations are positive with Indonesian yield movements in the past year at +54% (based off the 10yr yield and using weekly correlations). Intuitively we would expect the opposite to hold, but Indonesian yields are mostly likely following broader US yield direction over this period. USD/IDR correlations with US 10yr yield moves over the past year is around +53%. This suggests US yield shifts will hold move sway on IDR direction.
  • Offshore portfolio flows remain a headwind for IDR. So far this month we have seen just over $800mn in equity outflows, while bond flows have been -$460mn (up until the 19th of April).
  • 5yr CDS is off recent highs, but is comfortably above recent lows.
  • Beyond tomorrow's BI announcement the data calendar is quiet until early May (when CPI and PMIs print).