USD/IDR: Rupiah bounces off weekly lows on Bank Indonesia’s rate cut decision

Dhwani Mehta FXStreet

Indonesia’s central bank, Bank Indonesia (BI), slashed its benchmark 7-day reverse repo rate by 25bps to 3.50% at its February monetary policy meeting held this Thursday, as widely expected.

Governor Warjiyo said that global economic recovery is seen improving with vaccination started in many countries.

Additional comments

BI cuts deposit facility rate by 25 bps to 2.75%.

BI cuts lending facility rate by 25 bps to 4.25%.

Mass vaccination will support economic recovery momentum.

Q4 GDP below expectation, but economy continues to recover.

Revises down 2021 GDP outlook to +4.3% to +5.3%, vs +4.8% to +5.8% range previously.

2020 balance of payments seen reporting a surplus.

Keeps 2021 current account deficit estimate at 1% to 2% of GDP.

Rupiah fundamentally undervalued, has room to strengthen.

2021 inflation YoY seen within 2%-4% target range.

Reduction of lending rates has so far been limited.

interest rate decision consistent with low inflation outlook, external stability, effort to support economy.

Bank Indonesia to remove down payment requirement for vehicle loans for all vehicles.

Bank Indonesia’s new down payment rules to take effect march to end year.

Bank Indonesia to loosen loan to value ratio to 100% for mortgages of some properties from march to end year.

Bank Indonesia to use all policy instruments to support economic recovery.

FX implications

Despite the expected rate cut from the central bank, the Indonesian Rupiah (IDR) caught a fresh bid wave vs. the US dollar and bounced-off weekly low of 14,053.50

The USD/IDR pair was last seen trading at 14,027, adding 012% on the day.

Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

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