- USD/IDR snaps three-day downtrend, bounces off five-week low.
- BI Governor Perry Warjiyo hints at a shift in monetary stance.
- Covid woes back USD rebound, offer extra strength to the pair.
- US data, risk catalysts should be watched for fresh impulse.
USD/IDR picks up bids to $14,480, up 0.27% intraday, as European traders brace for Friday’s bell. In doing so, the Indonesian rupiah (IDR) pair rebounds from the lowest levels since June 21, marked the previous day, while also snapping a three-day downtrend.
The pair’s recovery moves could be traced to comments from Bank Indonesia (BI) Governor Perry Warjiyo who spoke during an online seminar with local economists per Reuters.
The central bank governor said, “Indonesia's central bank will shift its monetary policy stance in 2022 to ‘pro-stability’ of the financial markets, but its other policy tools will be used to support an economic recovery from the COVID-19 pandemic.” The comments suggest the central bank is planning to reduce excess liquidity from the banking sector, per Reuters. It was also mentioned that BI’s Warjiyo also repeated pledge to use “pro-growth” tools during rest of 2021.
Other than BI Governor Warjiyo’s comments, the covid woes in the Asian nation and the International Monetary Fund’s (IMF) reduction of GDP growth for Indonesia, 3.9% versus 4.3% prior, also favor USD/IDR buyers. It’s worth noting that the Indonesian government also cut 2021 GDP forecasts “to between 3.7 and 4.5 percent from between 4.5 and 5.3 percent,” per Reuters.
It's worth noting that the highest daily covid numbers in the US since February also underpins the US dollar’s safe-haven demand, not to forget downbeat equities.
Looking forward, US PCE Core Price Index for June is up for printing higher-than-previous figures of 3.7% YoY and can keep the USD/IDR on the front foot as the same renews reflation fears. However, covid and US stimulus headlines should also be watched closely for clearer directions.
Technical analysis
Although 200-day EMA put a floor under the USD/IDR prices around $14,400, bulls remain unconvinced before crossing a downward sloping resistance line from July 20 near $14,520.