MUFG’s Lloyd Chan highlights the continued vulnerability of the Indonesian rupiah as the USD/IDR rate returns above 18,000 amid renewed tensions in the Middle East and elevated US yields. While attractive government bond and SRBI bond yields have supported foreign capital inflows into the bond market, sustained net foreign equity outflows are tipping the balance of risks towards further rupee depreciation.
External pressures weigh on the Rupee
“We remain cautious on selected regional currencies, especially the Indonesian rupiah.”
“Yesterday, the IDR suffered regional losses and the USDIDR increased by 0.5% and crossed the 18,000 level again.”
“Renewed geopolitical tensions in the Middle East and elevated US yields continue to put external pressure on the rupee.”
“While elevated government bond and SRBI yields have helped attract foreign capital inflows to the bond market, Indonesia continues to grapple with persistent net foreign capital outflows.”
“Overall, the balance of risks remains tilted towards further rupee weakening.”
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