Halister News

(Bloomberg) -- USD/IDR looks to extend its rangebound trade between 13,000-13,500 in the short-term as Bank Indonesia looks set to leave its benchmark reference rate unchanged tomorrow, Bloomberg strategist David Finnerty writes.

• BI is forecast to keep its reference rate steady at 6.75%, according to all 19 economists in Bloomberg survey, as it prepares to adopt the 7-day reverse repo rate as its new benchmark instrument on Aug. 19
• USD/IDR has been confined to 13,000-13,500 range since mid- Feb.
  • Initial support is seen at 50-DMA, currently 13,196, while resistance is at 100- DMA, currently 13,437
• BI said in its April statement it will continue to strengthen monetary operations framework through a “consistent implementation of the term structure of monetary operations”, signaling lowering rates is not a priority at the moment
• April CPI declined to 3.60% but remained within BI’s 2016 target of 3%-5%, further indicating that current policy rate is accommodative at present
• Other factors that may encourage BI to remain on hold include:
  • Risk that food inflation ticks up as monsoon season approaches
  • U.K. Brexit referendum next month may spur risk-off sentiment; EM mkts may face capital outflows if U.K. does vote to leave the EU
• Low probability of Fed rate hike in June should keep IDR from being pressured near-term
• 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.