- USD/IDR struggles to keep the rebound from weekly low.
- Indonesia registers record covid-led death toll, keeps budget deficit target of 5.7% of GDP.
- Bank Indonesia may hold a 7-day reverse repurchase rate at 3.50%, where it has been since February.
- Market sentiment dwindles amid Japan off, pre-ECB lull.
USD/IDR prints mild gains of 0.18% intraday, seesaws around 14,500, heading into Thursday’s European session. In doing so, the Indonesian rupiah (IDR) pair snaps a two-day downtrend but the recovery moves lack strength ahead of the Bank Indonesia (BI) Rate decision.
Indonesia’s IDX Composite track S&P 500 Futures to remain positive amid a lackluster session due to the Marine Day off in Japan and the market’s cautious mood ahead of the ECB. Even so, the coronavirus woes in the world’s fourth most populous country keep the IDR pressured.
Reuters highlight the nation’s record high covid-led death of 1,383 even as the daily infections. The same is the case with the UK where the death toll jumped 50% weekly. Australia, unfortunately, leads the covid woes with the 10-month high infections and over 50% lockdown in the nation.
On a different page uncertainty surrounding US President Joe Biden’s infrastructure spending and budget passage, as well as the Sino-American tussles, challenge the market’s mood, keeping the US dollar afloat.
At home, Finance Minister Sri Mulyani Indrawati said on Wednesday, per Reuters, “Indonesia's budget deficit target will be kept at 5.7% of gross domestic product and the government will cut the allocation for other areas to cover for rising spending on health care and welfare programs.”
Looking forward, USD/IDR traders will pay attention to the BI decision even if the Indonesian central bank isn’t expected to act. The reason is the search for any fresh comments amid the covid woes at home. In this regard, Reuters said, “BI last week slashed its 2021 GDP growth forecast to 3.8% from 4.6%, based on an initial assessment and assuming containment measures will effectively control the outbreak within a month. Indonesia's GDP shrank 2.1% last year, the first contraction since 1998, due to the fallout of the pandemic.”
The poll also mentioned, “All 23 analysts in the poll who gave medium-term forecast expect no change in the benchmark rate until the end of the year, with a minority tipping a 25-bps hike in the first quarter of 2022.”
Technical analysis
Although the $14,670–700 region becomes a tough nut to crack for the USD/IDR bulls, sellers may refrain from fresh entries above the 100-DMA level of $14,430.
