Rupiah Refreshes 21-Month High, Skips Indonesian Inflation, Fiscal Updates

  • USD/IDR is in a four-day uptrend to post the highest level since October 2020.
  • Indonesia Inflation firmed up in June, FinMin Sri Mulyani Indrawati tries to defend currency buyers.
  • The US Dollar encourages a broad risk-free mood ahead of the ISM manufacturing PMI for June.

USD/IDR refreshes a two-year high of around $14,988 as risk aversion underpins US dollar buying in Friday’s Asian session. In doing so, the Indonesian rupiah (IDR) pair fails to encourage the upbeat inflation data and economic updates from the country, transmitted recently by Finance Minister (FinMin) Sri Mulyani Indrawati.

Indonesian inflation for the month of June rose to 4.35% year-on-year from 4.17% forecast and 3.55% previously. However, core inflation fell below market consensus from 2.72% to 2.63% year-on-year. That said, the inflation print rose to 0.61% MoM from 0.44% expected and 0.40% previously.

Following the inflation report, Indonesia’s FinMin Indrawati crossed wires, via Reuters, while raising hopes for a lower budget deficit in 2022 on the back of strong revenues. “Indonesia is likely to run a budget deficit of 732.2 trillion rupees in 2022, or 3.92% of gross domestic product, lower than the government’s previous forecast of 4.5% of GDP, due to strong revenue forecasts. “, said the decision maker.

Reuters adds details while mentioning: “Sri Mulyani Indrawati said during a hearing before the Parliamentary Budget Committee that this meant the government would reduce debt issuance to 757.6 trillion rupees (50.64 billion billion), down from 943.7 trillion rupees in its previous target.” Indonesia FinMin Indrawati, who is also the Governor of Bank Indonesia, also mentioned that the Indonesian central bank was in no rush to raise interest rates, even though consumer prices in June rose at the pace the fastest in five years, according to Reuters.

Elsewhere, the US Dollar Index (DXY) is picking up offers to reverse the previous day’s pullback from a two-week high as market sentiment deteriorates on growth fears. That said, the U.S. Dollar Index (DXY) moved from a 12-day high to a two-day uptrend as it closed Thursday trading around 104.75, near 104.80 at a time when we will put to press.

On Thursday, depressed US personal spending and weaker prints from the Fed’s preferred inflation gauge raised concerns about the health of the world’s largest economy and drowned the US dollar. The greenback’s previous pullback could also be linked to bearish US Treasury yields as benchmark 10-year bond coupons fell below 3.0%, before rising to 3.01% at the close, to represent about 50 basis points (bps) of a fall from June. peak.

While depicting the mood, S&P 500 futures fell 0.80% to mark a five-day downtrend, while 10-year US Treasury yields reversed the early Asian session bounce to 2.967%, refreshing three-week low.

Given the wave of risk aversion and the strength of the US Dollar, USD/IDR could extend the latest rise. However, the US ISM manufacturing PMI for June, expected at 55.0 vs. 56.1 previously, as well as risk catalysts, for further impetus.

Technical analysis

Multiple hurdles marked in 2020 challenge USD/IDR bulls targeting the round figure of $15,000. However, sellers have the least opportunity for entry unless they break the previous resistance line from mid-May around $14,925 at press time.