USD/IDR: External headwinds keep upside risks – OCBC

OCBC’s Christopher Wong reports USD/IDR briefly traded back towards 18,000 as higher Oil prices, elevated US Treasury yields and a firm Dollar weighed on the Indonesian Rupiah. Bank Indonesia has shifted intervention toward NDF and DNDF, seen as more effective and less reserve-intensive. OCBC warns that structural external pressures and a less favourable environment may keep risks skewed to further USD/IDR gains.

BI intervention mix and external drag

"BI Governor Destry Damayanti said that BI has reduced spot intervention to around 30% of its total FX intervention, with greater use of offshore NDF and domestic DNDF as these instruments are less reserve-intensive and, in BI’s assessment, more effective."

"This should not be read as BI stepping back from IDR stabilisation, but rather a change in the intervention mix."

"Near term, a less favourable external environment may continue to weigh on IDR. Some easing in these external pressures (i.e. US Treasury yields, oil and USD) would be needed for the IDR to stabilise more convincingly."

"USDIDR last closed at 17975 levels. Bullish momentum on daily chart intact while RSI rose into near overbought conditions. Risks still skewed to the upside."

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