Indonesian Rupiah: Policy uncertainty weighs on IDR against US Dollar – ING

ING economists Deepali Bhargava and Lynn Song flag renewed policy uncertainty for the Indonesian Rupiah (IDR) after the surprise resignation of Bank Indonesia’s (BI) governor, just as sentiment toward Indonesian assets was improving. Foreign participation in local bonds had started to recover on recent rate decisions and FX-stabilisation measures. They warn that questions over central bank independence and monetary policy direction point to further IDR weakness.

Governor exit clouds IDR outlook

"A surprise resignation from Bank Indonesia's governor introduces fresh policy uncertainty at a time when investor sentiment toward Indonesian assets was improving."

"While Acting Governor Damayanti should provide near-term continuity, markets will be closely watching the appointment of a permanent successor for signs of any shift in priorities."

"The resignation also comes at a less-than-ideal moment for the Indonesian rupiah."

"Foreign participation in Indonesia's local bond market had begun to recover following recent rate decisions alongside targeted measures to stabilise the rupiah."

"The resignation has inevitably raised questions about the independence of Bank Indonesia and the future direction of monetary policy. We continue to expect IDR to weaken amid policy uncertainty and weaker external balances."

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