USD/IDR Sinks Below 15500, Bond Inflows Highest Since May, BI Seen On Hold Tomorrow

USD/IDR is under 15500 in latest dealings, around 0.50% stronger in spot terms. Like elsewhere in South East Asia, we are closing in on earlier YTD lows (around the 15400 level). The 1 month NDF is also up nearly 0.50% in rupiah terms.

• The pair is in oversold territory, a theme familiar in other parts of South East Asia FX. Still, IDR remains 0.50% weaker in YTD terms and is lagging SGD and MYR positive returns seen so far this year (in spot terms, with MYR the clear standout).
• Bond inflow momentum is returning with August to date inflows surging back towards May highs (over $1bn so far this month). The coming turn in the Fed cycle, coupled with some positive surprises to the near term local fiscal outlook, have been clear positives.
• This coupled with broader improvement in global risk appetite are clear IDR positives. 5yr Indonesia CDS is trending back towards YTD lows.
• Tomorrow we have the BI decision. Some in the market see risks of a cut, but our bias is for no change. As we noted in our preview: It is highly unlikely to want to risk recent rupiah gains by cutting ahead of the Fed, which is generally expected to begin easing on September 18.