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  • USD/IDR surges to the highest levels since late-1998.
  • Indonesia registers the highest death toll in South-East Asia, cancels tabligh event.
  • Bank Indonesia is expected to announce a 0.25% rate cut.

USD/IDR extends the north-run to a fresh record high of 16,099, currently up 2.8% around 15,945, during the early Thursday. With the widespread coronavirus (COVID-19) outbreak in the Asian nation weighing on the Indonesian rupiah, the US dollar draws strength from safe-haven demand amid the rush to combat the virus. Investors will wait for the Bank Indonesia (BI) rate decision for fresh impulse.

Following the receipt of heavy criticism to handle the virus pandemic seriously, coupled with infections to the key ministers, Indonesia is taking serious measures to combat the pandemic. The latest effort could be seen in the last-minute cancellation of the large Muslim gathering over the annual tabligh event.

Even so, the death toll rises to 19 on Wednesday, the highest among the South-East Asian countries. The number of confirmed cases also registered the highest one-day surge of 55 to 227.

On Wednesday, the Finance Minister Sri Mulyani Indrawati signaled that the nation will put aside 17.2 trillion rupiahs for health care, social safety net and support for industries.

It should also be noted that the broad US dollar strength amid the rush to safeguard against the deadly virus also propels the pair.

The trading sentiment remains volatile with the US 10-year treasury yields rising two basis points to 1.273% with stocks in Indonesia, as indicated by IDX, down more than 5% by the press time.

Investors will await the BI decision for fresh impulse. Concerning this, TD Securities said, “We expect Bank Indonesia to cut its 7-day reverse repo by 25bps to 4.50%. BI looks set to take further action in conjunction with the government, to cushion the economy from the impact of COVID-19. Much will also take the form of macroprudential measures. IDR has weakened sharply and BI will be wary of provoking further weakness but after the Fed’s slashing of rates to zero, BI has more room to act. Separately they continue to intervene in the bond market, with foreign outflows accelerating recently. BI is likely to revise lower its growth and inflation forecast.”

Technical levels