OCBC's strategists Sim Moh Siong and Christopher Wong lower their Indonesian Rupiah (IDR) forecasts despite Bank Indonesia’s (BI) larger-than-expected 50 bp hike, arguing that renewed domestic policy uncertainty and an unfavourable external backdrop are weighing on IDR. They see elevated Oil prices, geopolitical risks and higher developed-market yields pressuring high-beta Asia FX, with a durable IDR recovery needing clearer policy signals and external relief.

Policy uncertainty and oil weigh on Rupiah

"IDR remains under pressure despite BI’s larger-than-expected 50bp hike. "

"The move underscored BI’s commitment to IDR stability, but its impact has been diluted by renewed domestic policy uncertainty, including plans to tighten state control over key commodity exports — a move that may support revenue collection and FX reserves over time, but could unsettle investor confidence near term."

"The external backdrop remains unfavourable, with elevated oil prices, geopolitical risks and higher DM yields weighing on oil-importing, high-beta Asia FX."

"We are lowering our IDR forecasts to reflect this tougher mix."

"Further BI tightening may help anchor sentiment, but a durable IDR recovery likely requires clearer domestic policy signals and relief from oil, geopolitics and global yields."

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