OCBC strategists Sim Moh Siong and Christopher Wong say S&P’s affirmation of Indonesia’s BBB/A-2 rating with a stable outlook is slightly supportive of the Indonesian rupiah (IDR) by removing immediate downgrade risks. However, they warned that without clear fiscal consolidation and improved capital flows, IDR gains could be limited, while the recent surge in oil prices could be offset by higher import costs, inflation and subsidy burden. USD/IDR is trading near 18,105.
Relief in ratings but oil cap upside down
“IDRs may get some relief from S&P’s rating affirmation, but recent oil gains may still limit the extent of IDR gains.”
“The affirmation of Indonesia’s BBB/A-2 rating with a stable outlook by S&P is slightly supportive of the IDR, as it removes immediate sovereign downgrade risks and signals that recent fiscal and external stresses are temporary and manageable.”
“However, the impact may be limited unless it is followed by demonstrable fiscal consolidation and a sustained improvement in capital flows.”
“Elsewhere, the recent surge in oil prices could also limit IDR gains, given the potential impact through Indonesia’s import bill, inflation and fuel-subsidy costs, as well as sentiment.”
“USD/IDR last closed at 18105 levels. Mild bullishness remains intact on the daily charts, while the RSI is near overbought conditions. Resistance at 18190 (previous high). Support at 18000, 17910 (21 DMA).”
(This article was created with the help of an artificial intelligence tool and reviewed by an editor. know more.)
