USD/IDR: Near-term weakness in the rupiah to persist amid a cooling trade surplus – SocGen

USD/IDR struggles for clear direction following a three-day uptrend. Looking ahead, narrowing trade surplus should be moderately bearish to the Indonesian rupiah.

IDR to remain under pressure

“Recovering domestic demand could sustain the narrowing momentum in trade balance, and this should be moderately bearish to the IDR.”

“We expect inflation to increase gradually towards the 3% target in 2022 and expect the BI to deliver its first rate hike by 2Q 2022, delivering a total of 50bp in hikes this year.”

“We believe that any policy response by BI to cushion the impact from prospective US Fed rate hikes should serve to contain depreciation pressures on the IDR.”