USD/IDR marches towards $15,300 despite subdued DXY, US PCE in focus

• USD/IDR is advancing towards $15,300 as BI’s hawkish policy has failed to support the Indonesian Rupiah.
• Economists believe that BI’s hawkish policy and modest intervention will settle it around $15,000.
• DXY’s investors are awaiting the release of the US PCE and Michigan CSI data.

The USD/IDR pair is attempting to overstep the critical hurdle of $15,275 in the Tokyo session. The asset is extremely bullish despite the meaningful correction in the US dollar index (DXY), which has already dragged the asset to near 112.00. The major is aiming to hit the ultimate target of $15,300 sooner despite the tailwinds of soaring interest rates by the Bank of Indonesia (BI).

In September’s monetary policy meeting, BI Governor Perry Warjiyo hiked the interest rates by 50 basis points (bps). The focus of the BI is to bring stabilization in the Indonesian Rupiah in the ongoing volatile environment.

Economists at ANZ Bank forecast USD/IDR at 15,000 by the end of the year and expect the policy rate to peak at 5.75% in Q2 2023. A modest intervention in the currency markets by the BI has managed to bring some stability to the Indonesian Rupiah.

Meanwhile, Edi Susianto, head of BI's monetary management department, told that the central bank would prioritize policies, which should support the market mechanism. He further cited that the BI has no need for capital controls, as reported by Reuters.

On the US dollar index (DXY) front, the DXY is likely to remain on the tenterhooks ahead of the release of the US Personal Consumption Expenditure (PCE) data. The economic data is seen higher at 4.7%, 10 bps above the prior release. Apart from that, US Michigan Consumer Sentiment Index (CSI) data will also remain in focus. The sentiment data is expected to remain steady at 58.5.