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USD/IDR Drift Higher Continues, BI Sees Need For Easier Policy Settings, But Can't Move Yet

IDR

USD/IDR spot has drifted higher in the first part of Thursday trade. We were last near 15720, which is around 0.20% weaker in IDR terms. The 1 month NDF is largely unchanged though, last tracking at 15735, which just under Wednesday highs near 15740/45. Earlier Feb highs in the 1 month NDF rested just above 15800.

  • IDR is underperforming other USD/Asia pairs so far today, which are mostly weaker.
  • Portfolio flows remain a headwind for IDR. We saw close to flat net equity flows yesterday, while bond outflows were on Tuesday. Foreign investors' holdings of local bonds have fallen since late Feb.
  • Bi Deputy Governor Juda Agung was on the wires a short while ago stating that the economy needs a rate cut to boost growth, but the BI can't adjust rates yet, given global conditions (BBG). This likely reflects the still elevated Fed funds backdrop.
  • The BI official added that the central bank will keep the rupiah stable.
  • Still, the recognition of the need to cut rates, underscores the BI's policy outlook. Concern around the domestic economy may also keep a lid on equity upside.
  • On the data front tomorrow we have the manufacturing PMI for Feb, along with inflation data.
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