The Indonesian rupiah has weakened against the US dollar in reaction to the rise in US yields in the last two weeks. Still, the rupiah has remained relatively stable, in contrast to its “high beta” reputation. Economists at Credit Suisse the USD/IDR pair to move within a 14,500-15,200 range.

BI policy rates are still relatively high

“We expect a USD/IDR forecast range of 14,500-15,200.” 

“We expect no policy change at the 23 June BI meeting, with hikes likely to begin on 21 July. This ‘slow tightening’ leaves USD/IDR subject to upward pressure as the Fed hikes rapidly. Still, we think that favourable balance of payments and the fact that real rates in Indonesia not as negative as those in the Philippines means that IDR will be more stable than PHP.” 

“Real policy rates in Indonesia are high compared to the Philippines and the US. This ‘less negative’ real policy rate should help slow down (but not fully offset) foreign outflows from rupiah government bonds.”