USD/IDR: Upside risks with BI liquidity tools – OCBC

FXStreet Insights Team FXStreet

OCBC strategists Sim Moh Siong and Christopher Wong highlight USD/IDR grinding higher toward 17,000 on firm Dollar, risk-off sentiment and Oil-related terms-of-trade pressures. Bank Indonesia’s (BI) new FX instruments (SVBI, SUVBI) are seen as helping to smooth volatility and USD liquidity but not changing the underlying FX anchor. External factors and Iran-related risks are expected to keep IDR under pressure near term, with resistance around 17,100.

Indonesia Rupiah pressured by external backdrop

"USD/IDR continued to edge modestly higher toward the 17,000 level, reflecting a still-challenging external backdrop marked by firm USD, risk-off sentiment and oil-related terms-of-trade pressures."

"Bank Indonesia’s (BI) introduction of FX-denominated instruments such as SVBI and SUVBI should help mitigate volatility at the margin."

"While these tools do not alter the underlying FX rate anchor, the measures may improve how USD liquidity is intermediated onshore."

"By allowing exporters and banks to hold and recycle USD domestically, the need to source USD aggressively via the spot market is reduced, thereby partially help to ease pressures and limit the risk of disorderly overshoots in USD/IDR."

"That said, external factors remain the dominant driver, and weaker risk sentiment alongside elevated oil prices amid risks of a more protracted Iran conflict are likely to continue weighing on the IDR, alongside other Asian FX."

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

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

GBP/USD clings to gains near 1.3400

GBP/USD retreats after reaching a three-week high above 1.3430, challenging the 1.3400 yardstick on Thursday. Although easing political uncertainty in the UK helps the quid limit its downside, escalating tensions in the Middle East support the Greenback, keeping Cable under scrutiny.

EUR/USD faces resistance around 1.1450

EUR/USD keeps the bid bias although it seems to have met a tough hurdle around 1.1450 on Thursday. The pair’s advance follows the bearish tone in the US Dollar despite escalating tensions in the Middle East and a broad-based cautious stance from market participants.

Gold flirts with two-day highs, approaches $4,130

Gold stages a modest rebound on Thursday, setting aside a three-day losing streak and managing to surpass the $4,100 mark per troy ounce. However, steady geopolitical tensions have revived concerns over persistently high global inflation, reinforcing expectations of higher rates across the board and somewhat curtailing the yellow metal’s upside potential.

Bitcoin stalls as mixed ETF flows, renewed US-Iran tensions cap upside

Bitcoin trades at $63,000 on Thursday, recovering slightly after facing rejection near $64,000. Renewed geopolitical uncertainty has dampened risk appetite, limiting BTC upside potential.

Japan may be changing its Yen strategy, but markets don’t look scared

Japan may be changing its intervention playbook, but that might not be enough to rescue the battered Yen. With USD/JPY hovering at four-decade highs, the currency’s weakness is being driven less by speculative pressure and more by a powerful structural force: the wide US-Japan rate gap.

Bye, forward guidance: How to trade when central banks choose silence

Central banks have spent years telling markets what might come next. Now, traders face the possibility that they say a lot less. From the Federal Reserve to the European Central Bank and the Bank of England, policymakers are pushing back against forward guidance.