MSCI risks intensify Indonesian Rupiah pressure against US Dollar - OCBC

USD/IDR retains an upside bias. OCBC’s Sim Moh Siong and Christopher Wong maintain a mildly cautious stance on the Indonesian Rupiah (IDR), citing uncertainty over MSCI reclassification, foreign equity outflows, elevated oil prices and a firm US Dollar. Credible enforcement of market reforms remains a priority for investors, and portfolio flows need to stabilise for a sustained recovery. Overbought RSI readings nevertheless call for vigilance for a technical turnaround.

Rupiah Constrained by MSCI Uncertainty and Oil Risks

"IDR remained under pressure amid lingering uncertainty over MSCI’s proposed reclassification of Indonesia to standalone status. The JCI fell sharply earlier this week, accompanied by foreign equity selling, before recovering modestly yesterday. The IDX’s latest measures to address concerns over market transparency and trading practices have yet to restore investor confidence. Meanwhile, elevated oil prices continue to weigh on IDR, adding to an already challenging external backdrop."

"We retain a mildly cautious bias on IDR. While the authorities have taken steps to address MSCI’s concerns, investors will likely want to see credible enforcement before reassessing their exposure."

"More importantly, we would watch whether continued foreign equity selling spills over more materially onto government bonds, particularly as elevated oil prices and a firm USD leave IDR vulnerable to renewed pressure. For now, some easing in oil prices and a pullback in USD could offer respite, but a more convincing IDR recovery would require signs that portfolio flows are stabilising."

"USD/IDR last closed at 18183. Bullish momentum on daily chart intact while RSI rose to overbought conditions. While upside bias remains intact, we continue to look for signs of any technical turnaround as the pair approaches its prior high. Resistance at 18190 (2026 high), 18450 levels. Support at 18000, 17972 (21 DMA)."

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