- USD/IDR reverses early Asia gains, struggles to extend Tuesday’s recovery.
- BI Governor warned of potential price pressure in 2022.
- Firmer USD favors buyers ahead of US Durable Goods Orders data, risk catalysts are important too.
USD/IDR declines to $14,391, down 0.05% intraday, after Bank Indonesia (BI) Governor cites inflation risk ahead of Wednesday’s European session. In doing so, the Indonesian rupiah (IDR) pair reverses the early Asian gains, mainly earned through the US dollar strength.
Reuters recently came out with comments from Governor Perry Warjiyo during a coordinating meeting on inflation management during early Wednesday. While the policymaker stated the inflation to remain inside the 2.0% to 4.0% target range during 2021 and 2022, he does warn of the gradually firming of upside pressure during the next year.
"We need to anticipate a risk of rising inflation in 2022, in line with a rise in domestic demand and increasing global commodity prices," said BI Governor Warjiyo per Reuters. The news piece adds, “Indonesia's annual inflation rate has stayed below BI's target range since June of 2020 as the coronavirus pandemic dampened domestic consumption. July's rate was 1.52%.”
It’s worth noting that the US Dollar Index (DXY) strength, amid firmer US Treasury yields and a downbeat stock future, favored the USD/IDR bulls earlier in the Asian session to extend the previous day’s recovery moves.
The greenback gauge benefits from the worsening of the coronavirus conditions in the developed economies and cautious sentiment ahead of US Durable Goods Orders. Furthermore, cautious mood ahead of the annual speech of Fed Chair Jerome Powell at the Jackson Hole Symposium, on August 27, adds to the sluggish mood and backs the DXY bulls to snap a three-day downtrend.
Given the recently fading concern over Fed’s easy money policies, today’s US Durable Durable Goods Orders for July, forecast -0.3% versus +0.9% prior, will be the key. Though nothing more important will be than the US preliminary Q2 GDP and Fed Chair Jerome Powell’s speech the Jackson Hole.
Technical analysis
Although a downward sloping trend line from July 20 restricts short-term USD/IDR upside near $14,550, bulls remain hopeful until witnessing a daily closing below $14,300, comprising 200-DMA.
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