USD/IDR: Rupiah bounces from two-year lows on Bank Indonesia’s expected 50 bps hike
20.10.2022, 07:30

USD/IDR: Rupiah bounces from two-year lows on Bank Indonesia’s expected 50 bps hike

At its October monetary policy meeting on Thursday, Indonesia’s central bank, Bank Indonesia (BI), hiked its 7-day reverse repo rate by 50 bps from 4.25% to 4.75%, as widely expected.

The central bank Governor Warjiyo said in the policy statement that “Indonesia to monitor forex supply, strengthen policy to stabilize rupiah.”

Additional Comments

2022 Current Account surplus estimate at 0.4-1.2% of GDP.

Depreciation of rupiah relatively better than other peer currencies.

Rupiah depreciation is in line with dollar strength, rising uncertainty and aggressive monetary tightening by some countries.

Impact of fuel price hikes on food prices not as big as pvsly anticipated.

Core inflation remains low, under control.

Oct headline inflation is seen below September's inflation rate based on survey.

2022 inflation is still seen above target range.

Will intervene in FX markets to prevent imported inflation.

Continue monitoring potential impact of global risks on domestic macroeconomic conditions.

Interest rate decision taken as a front-loaded, pre-emptive, forward looking measure to lower inflation expectations that are too high.

Intended to bring inflation back to within target in first half of 2023.

Rate decision also aimed at ensuring rupiah reflects fundamental value amid strong USD.

Market reaction

On the expected rate decision by the Indonesian central bank, the Indonesian Rupiah (IDR) rebounded against its American counterpart, driving the USD/IDR from two-year highs of 15,587.50. At the press time, the spot trades 0.47% higher at 15,567.50.

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