In June, the Indonesian rupiah remained strong against the US dollar at the beginning of the month but depreciated significantly toward the end of the month. In July, the IDR is forecast to remain robust against the USD, economists at Mizuho Bank report.

Significant trade surplus in Indonesia to support the IDR

“The May trade balance of Indonesia saw a significant decline in surplus compared to that in April, as a result of the ban on palm oil exports. However, the restriction on exports has already been lifted. It is, therefore, possible to expect a significant trade surplus in Indonesia, which is likely to support the Indonesian rupiah.”

“Risk scenarios include a possible situation in which the rise of CPI becomes uncontrollable in various countries and regions, while many countries including the US at the top of the list are raising their policy interest rates. Such a situation is expected to fuel concerns over a global economic downturn, resulting in growing risk-averse sentiment in the market that could encourage market participants to sell the currencies of emerging countries. Following such a trend, the Indonesia rupiah could depreciate as well. However, as the most likely scenario, the Indonesian rupiah is poised to remain robust in July.”