Warjiyo Outlines Possible Exit Strategy/Timeline

Spot USD/IDR reopened on a softer footing and last sits -33 figs at IDR14,495, while the rupiah is among the best performers in Asia EM FX space. The move seems driven primarily by USD dynamics from last Friday, perhaps amplified by Gov Warjiyo's recent suggestion that the BI might begin the tightening cycle next year.

• Gov Warjiyo said Friday that Bank Indonesia could begin tightening monetary policy next year. The exit strategy would involve gradually reducing liquidity "and then later, at the end of next year, maybe some interest-rate action," but "this is very uncertain." The official added that the economy is expected to grow +4.1%-5.1% Y/Y this year, with the central bank projecting growth rates of +6.3% and +5.5% for Q3 and Q4 respectively.
• Bears look for a dip through Jul 6 low of IDR14,463, which would complete the formation of a mini-double top pattern. Below there lies Jun 28 low of IDR14,415, which provides the next layer of support. Bulls see Jul 9 high of IDR14,550 as their initial target and a break here would open up Jul 2 cycle high of IDR14,568.
• USD/IDR 1-month NDF sits at IDR14,550, a dozen figs higher, with topside focus falling on Jul 8 high of IDR14,664. Bears set their sights on Jul 5 low of IDR14,493.
• Indonesian trade balance, due Thursday, headlines the local docket this week.