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ANZ analysts suggest that a stable macro environment and scope for further rate cuts should see continued investor interest in Indonesia’s local currency bonds and especially in an environment where global investors are still chasing yield, which will bode well for the IDR.

Key Quotes

“Prospects for more significant reforms during President Jokowi’s second term, if announced and executed well, will provide further support for the currency. The key risks facing IDR at present are investor positioning, which are overweight Indonesian bonds, and the ongoing current account deficit. We expect yield support and the reform story to lead to a modest appreciation in the IDR in 2020.”