- USD/IDR retreats from two-month high, prints the first daily loss in three.
- DXY pares gains at two-decade high amid chatters over Russia, China.
- Fed fuelled the US dollar despite matching 0.75% rate hike expectations.
- Bank Indonesia is likely to announce 25 bps rate increase and can favor the pair sellers.
USD/IDR slips towards intraday low, down 0.10% on a day near $15,020 as traders await Bank Indonesia (BI) Rate announcement during early Thursday. In doing so, the USD/IDR snaps a two-day uptrend while reversing from the highest levels since July 22, marked the previous day.
In addition to the pre-BI consolidation, the Indonesian rupiah (IDR) also cheers the recent winding down of palm oil inventories at home. “Backed by Jakarta's waiver of palm oil export levies, which was recently extended to Oct. 31 and reversed course from an export ban in May that had shut them out of global trade, producers are moving in to lighten up their stocks at tempting prices,” stated Reuters.
Forecasts suggest that the BI is likely to announce 25 basis points (bps) of a rate hike during today’s monetary policy meeting announcements. “Bank Indonesia will follow a surprise August interest rate rise with another 25 basis point hike at its meeting on Thursday, still moving more slowly than most of its peers in trying to bring down inflation, a Reuters poll forecasts,” said Reuters ahead of the BI release.
On the other hand, US Dollar Index (DXY) stays firmer at the two-decade top of 111.65, around 111.60 after refreshing the multi-year high before a few hours. In doing so, the greenback’s gauge versus the six major currencies cheers the Fed’s third 0.75% rate hike. The US Federal Reserve (Fed) announced 75 basis points (bps) of a rate hike, the third one in a line of such kind, as it wants to tame inflation fears even at the cost of a “sustained period of below-trend growth” and a softening in the labor market. Fed Chairman Jerome Powell also signaled that the way to tame inflation isn’t painless ahead.
In addition to the Fed-linked woes, Russian President Vladimir Putin’s announcement to mobilize partial troops also reignited the Ukraine-linked geopolitical fears and the supply-crunch woes. In a reaction, Ukrainian President Volodymyr Zelensky said Ukrainian neutrality is out of the question and he rules out that a settlement can happen on a different basis than the Ukrainian peace formula. On the same line were the comments from the Group of Seven (G7) leaders who confirmed cooperation on support for Ukraine.
Furthermore, Goldman Sachs revised China’s GDP forecasts amid fresh covid woes, which in turn adds strength to the risk-off mood and should have favored the USD/IDR buyers.
Moving on, USD/IDR traders will pay close attention to the BI announcement as a surprise 0.50% rate hike could quickly drag the quote to defy the bullish chart formation and welcome the bears.
Technical analysis
A six-week-old bullish channel, currently between $15,130 and $14,870, could keep USD/IDR buyers hopeful.
