Bank Indonesia to pause easing due to weaker IDR
Oct 7 (Reuters) -Bank Indonesia (BI) is likely to keep rates unchanged on Oct 16 due to the weaker IDR, aftersurprising markets with a 25-basis-point rate cut to 6.00% on Sept 18, justahead of the Federal Reserve's 50 bps cut.
While Indonesianinflation slowed to itslowest since 2021 last month, the rupiah's recent sharp dropis likely to dent hopes of further BI easing this month.
USD/IDR has rallied to above 15600 on Mondayfrom a 15060 low on Sept 25, while the yield on benchmark 10-year Indonesian government bonds has risen to 6.74% from a 6.43% low on Sept 20.
USD/IDR risks a squeeze towards the 15800 level after crossing the 38.2% Fibonacci resistance at 15600.Bullish USD/IDRNDFs above 15700 underpin the move aftera strong U.S. jobs report propelled the dollar to its best week since 2022.
Astronger IDR was one of the considerations behind BI'srate cut in September as the central bank remains focusedon currency stability and investorinflows. Renewed weakness in the IDR will hence preventfurther easingthis month.
The chance of another hefty Fed cut has also been dimmed by recent U.S. data which continues to indicate robust growth and strong employment. The renewed strength of the USD combined with Middle East war risk will likely keep the IDR under pressure and BI on hold this month.
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Catherine Tan is a Reuters market analyst. The views expressed are her own. Editing by Sonali Desai
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