USD/IDR: Rupiah outlook as Indonesia inflation slips again

July 31, 2023 08:30 PM PDT | By Invezz

USD/IDR: Rupiah outlook as Indonesia inflation slips again — Image source: Invezz

Indonesia inflation is falling

The USD to Indonesian rupiah drifted upwards after Indonesia published another encouraging set of inflation data. In a report, the statistics agency said that the headline consumer price index (CPI) dropped to 0.21% on a MoM basis in July. That decline was steeper than what analysts were expecting.

The headline inflation translated to a year-on-year increase of 3.08%, the lowest level since April last year. Inflation has been falling consistently after peaking at 5.95% in 2022. The core consumer price index (CPI) dropped to 2.48%.

These numbers mean that the country’s inflation has moved below the target set by Indonesia’s central bank. Therefore, there is a likelihood that the bank will leave interest rates unchanged for the rest of the year.

The alternative scenario is where the central bank decides to slash rates in a bid to stimulate the economy. Recent economic numbers showed that the country’s economy is slowing as the prices of key exports retreated.

As I wrote here, Indonesia’s exports and imports slumped in July. Exports dropped by 21.1% in June while imports fell by 18.3%. These are important numbers since Indonesia relies greatly on exports.

Looking ahead, the next key catalyst for the USD/IDR exchange rate will be the upcoming US jobs numbers. ADP will publish its estimate of private payrolls on Wednesday. Economists expect the report to show that the private sector added 188k jobs in July.

The US will also publish the official non-farm payrolls (NFP) on Friday. These numbers will be important since the Fed has pledged to be data-dependent when making its decision.

USD/IDR technical analysis

USD/IDR chart by TradingView

The USD to IDR pair has held quite well recently, helped by the strong US dollar and the falling Indonesia’s inflation. On the daily chart, the pair has moved above the 25-day and 50-day moving averages. It is also nearing the important resistance point at 15,213.12, the highest point in July

Therefore, the USD/IDR exchange rate will likely continue rising in the coming days as hopes of Indonesia’s rate cuts rise. If this happens, the next level to watch will be at 15,213.

The post USD/IDR: Rupiah outlook as Indonesia inflation slips again appeared first on Invezz.

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