Halister News

(Bloomberg) -- USD/IDR may breach psychological 13,000 level in short-term, even if Bank Indonesia lowers policy rate this week, as rupiah stands to gain from tax amnesty inflows and ongoing demand for Indonesia’s high-yielding bonds, Bloomberg strategist David Finnerty writes.

• Global funds have increased holdings of Indonesian bonds by $6.9b this year
  • Since Brexit vote on June 23, 9.8t rupiah ($748.1m) were purchased by foreigners, spurred by high yield and stable rupiah
  • Ongoing bond purchases by foreigners and tax amnesty funds flowing back should support IDR strength
• USD/IDR’s MACD remains bearish with reading below zero and signal line; USD/IDR currently +0.1% at 13,101
• Bank Indonesia will cut reference rate by 25bps, according to 16 out of 25 economists in a Bloomberg survey
  • 9 forecast the central bank to leave rate unchanged at 6.50%; decision due July 21
• Deputy Gov. Perry Warjiyo said last month there’s room for monetary easing
  • Reduced expectations of a Fed hike this year, following U.S. May payroll data in June and Brexit, provide window for further easing
• June CPI was 3.45% y/y, well within BI’s target corridor of 3%-5% for 2016
• NOTE: Bank Indonesia will be switching from reference rate to reverse repo rate as the new its benchmark tool effective Aug. 19
• NOTE: David Finnerty is an FX strategist who writes for Bloomberg. The observations he makes are his own and are not intended as investment advice.