USD/IDR: Rupiah set to continue showing its resilience – Mizuho

In October, the Indonesian rupiah remained strong against the US dollar toward the middle of the month. However, the appreciation of the Indonesian rupiah slowed down toward the end of the month. In November, the Indonesian rupiah is forecast to remain robust against the greenback.

US interest rates to remain an important factor in the Indonesian rupiah market

“At the moment, Indonesia’s trade surplus is high enough to offset the current account deficit, keeping the Indonesian rupiah extremely stable. With regard to commodities prices, it is unlikely for prices to rise further, as there are some sources of concern, such as possible intervention by China in the coal market. However, it would take some time for the supply and demand balance to develop, and thus commodities prices could remain high for a while. The high commodities prices are likely to support the Indonesian rupiah in the times ahead.”

“As time goes by, US interest rates are only expected to rise and are not likely to fall, except for some temporary phrases of adjustment. Under such circumstances, it is difficult for the Indonesian rupiah to continue one-sidedly appreciating, even with high trade surplus. On the other hand, from the medium to long-term perspective, if the trade surplus remains high, the Indonesian rupiah is not likely to depreciate. Therefore, it is unlikely for the Indonesian rupiah to depreciate sharply as was seen in 2018 at the time of previous US interest rate hikes.”  

“The situation in Indonesia related to the COVID-19 pandemic has been under control, allowing economic activities to resume properly, which is another positive factor for the Indonesian rupiah. Therefore, the Indonesian rupiah is forecast to remain robust in November.”