Softer inflation, persistent currency risks: Indonesian Rupiah – MUFG

USD/IDR remains above 18,000 as the Indonesian Rupiah (IDR) stays weak. MUFG strategists highlight downside surprises in both Indonesia’s October Consumer Price Index (CPI) and core inflation, leaving Bank Indonesia (BI) with little inflation-based justification for tighter policy. With bond yields also rising, the strategists remain cautious and warn that a BI rate hike cannot be ruled out should currency pressures intensify.

Above USD/IDR 18,000: Weak Rupiah Constrains Bank Indonesia

"Indonesia's October CPI came in softer than expected, with headline inflation easing to 3.23%yoy from September's 3.28%yoy print and core inflation slowing to 2.56%yoy from 2.84%yoy, giving Bank Indonesia little inflation-driven reason to tighten, though IDR weakness remains a binding constraint."

"USD/IDR held above 18,000, while the 10-year Indonesian bond yield rose to 7.7%. Thursday's Q3 GDP release and Friday's FX reserves data will be key ahead of BI's 18 November policy meeting."

"We remain cautious on IDR, and a BI hike cannot be ruled out in the next policy meeting should currency pressures intensify."

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