Halister News

(Bloomberg) -- USD/IDR may remain within 12,900-13,200 range near-term even if Bank Indonesia lowers interest rates further, as ongoing tax amnesty inflows support the rupiah, Bloomberg strategist David Finnerty writes.

• Rupiah stability versus USD has been aided by inflows from the tax amnesty program which began mid-year
  • Indonesians submitted 3,613t rupiah ($277b) of declared and repatriated assets in the first phase of the program which ended in Sept; rupiah gained 1.3% during this period, climbing to 13,051 by Sept. 30 from 13,220 on June 30
  • While majority of participants sought lowest penalty rates in the first phase of tax amnesty program, many will also rush to participate in last and third leg, according to Aberdeen Indonesia
• Lower-than-expected core U.S. Sept. CPI data adds to expectations of just one potential Fed rate hike this year, which should further aid rupiah stability in the short-term
• Bank Indonesia will leave 7-day reverse repo rate unchanged at 5.0% when it holds policy meeting on Oct. 20, according to 14 of 26 economists in Bloomberg survey; 12 forecast 25bps rate cut
• The central bank cut policy rate by 25bps in September on sluggish global economic backdrop, low inflation, controlled current account deficit and relatively stable currency
  • Deputy Governor Perry Warjiyo said after Sept. meeting that BI is still at the stage of monetary easing which will continue to year-end or early 2017, signaling further rates cuts may be forthcoming
• Sept. CPI rose 3.07% y/y, lower end of BI’s target corridor of 3%-5% for 2016
• 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.