Indonesian Rupiah: External headwinds and MSCI risks – OCBC

OCBC strategists Sim Moh Siong and Christopher Wong retain a cautious stance on the Indonesian Rupiah (IDR), forecasting USD/IDR at 18100 by end-2026, peaking at 18200 in 1Q27 before easing to 17850 by end-2027. MSCI-related index uncertainty, elevated Oil prices and lingering Fed tightening risks may intensify pressures into early 2027, with spot potentially overshooting the forecast path before stabilising as external headwinds ease.

Rupiah under pressure then stabilising

"MSCI-related uncertainty remains an overhang, although Indonesian policymakers appear to be making efforts to address investor concerns and stabilise sentiment."

"Pressures may intensify into 1Q27 as MSCI’s review deadline draws closer and investor scrutiny of Indonesia’s progress increases."

"In addition, concerns of further Fed tightening and elevated oil prices could compound near-term pressures, potentially pushing spot USD/IDR temporarily above our forecast trajectory."

"We retain a cautious outlook on IDR, with USD/IDR projected at 18100 at end-2026 and 18200 in 1Q27, before easing towards 17850 by end-2027."

"We expect some stabilisation later in 2027, conditional on an easing in external headwinds and progress in addressing MSCI’s concerns."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)