ASEAN Outlook Talking Points:
- The Bank of Indonesia rate hike was unable to boost IDR amidst rising US Dollar
- PHP, MYR and SGD at risk of greenback strength. Can risk trends support them?
- USD/SGD is struggling to push above resistance amidst a reversal warning sign
Last Week’s Recap: IDR Still Fell After Bank of Indonesia Rate Hike
The Indonesian Rupiah depreciated last week against the US Dollar despite a rate hike to 4.50% from 4.25% by the central bank. Last Thursday, the Bank of Indonesia raised rates for the first time since 2014 and it also pledged to take “stronger measures” to maintain price stability. In addition, Governor Agus Martowardojo said that they will adjust rates if the situation forces them to do so again.
It appears as though Bank of Indonesia’s approach was not satisfactory enough for the markets. The Rupiah has lost ground against its US counterpart as USD/IDR rose to a 31-month high by the end of last week. In addition, the central bank has been burning through foreign reserves which fell to their lowest point since June 2017 in April. It also didn’t help that the US Dollar continued rising last week along with hawkish Fed monetary policy expectations.
The Week Ahead: ASEAN Bloc Currencies Focus on USD Performance, Risk Trends
An appreciation in the greenback that is accompanied with rising Fed rate hike expectations presents a risk for ASEAN bloc currencies like the