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Mitul Kotecha, Senior Emerging Markets Strategist at TD Securities, notes that Bank Indonesia left its policy (7 day reverse repo) rate unchanged as expected at 5.25% and maintained a “hawkish” stance.

Key Quotes

“BI stated they will maintain front loaded, pre-emptive policy, utilising their dual market intervention mechanism.”

“BI also stands ready to stabilise IDR. However, IDR weakened following the rate decision, hitting its lowest level versus USD since Oct 15.”

“We expect losses to be contained but much depends external factors, as CNH continues to lead Asian currencies lower.”

“BI feels that the current policy rate is sufficient to attract capital flows and stem fund outflows.”

“The proximity of elections next year is likely to limit the scope for hikes further out.”